Lung surfactant is inactivated in acute respiratory distress syndrome (ARDS) by a mechanism that remains unclear. Phospholipase (PLA2) plays an essential role in the normal lipid recycling processes, but is present in elevated levels in ARDS, suggesting it plays a role in ARDS pathophysiology. PLA2 hydrolyzes lipids such as DPPC-the primary component of lung surfactant-into palmitic acid (PA) and lyso-PC (LPC). Because PA co-crystallizes with DPPC to form rigid, elastic domains, we hypothesize that PLA2-catalyzed degradation establishes a stiff, heterogeneous rheology in the monolayer, and suggests a potential mechanical role in disrupting lung surfactant function during ARDS. Here we study the morphological and rheological changes of DPPC monolayers as they are degraded by PLA2 using interfacial microbutton microrheometry coupled with fluorescence microscopy. While degrading, domain morphology passes through qualitatively distinct transitions: compactification, coarsening, solidification, aggregation, network percolation, network erosion, and nucleation of PLA2-rich domains. Initially, condensed domains relax to more compact shapes, and coarsen via Ostwald ripening and coalescence up until the domains solidify, marked by a distinct roughening of domain boundaries that does not relax. Domains aggregate and eventually form a percolated network, whose elements then erode and whose connections are broken as degradation continues. The relative enzymatic activity of PLA2, set by the age of the sample, impacts the order and the duration of morphology transitions. The fresher the PLA2, the faster the overall degradation, and the earlier the onset of domain solidification: domains solidify before aggregating with fresh PLA2 samples, but aggregate and percolate before solidification with aged PLA2. Irrespective of the activity of the PLA2, all measured linear viscoelastic surface shear moduli obey the same dependence on condensed phase area fraction (log|G*| ∝ ϕ) throughout monolayer degradation. Moreover, the onset of domain solidification coincides with the time when the relative surface elasticity begins to increase.