The major etiologic agent in neonatal pneumonia and meningitis is group B streptococci (GBS). Nitric oxide (NO) production by alveolar macrophages (AM) in response to Gram-positive bacteria such as GBS and the effect of surfactant on this production have received little attention. We studied production of NO by GBS-stimulated AM using the Griess reaction, the effect of lung surfactant on this NO production, and the possible lipid peroxidation (LPO) of surfactant caused by NO. The LPO test was used to measure surfactant peroxidation. Heat-killed and live GBS were found to stimulate NO production by rat alveolar macrophages, and the presence of interferon gamma (IFN-gamma) increased this stimulation in a synergistic manner. Curosurf(R), the natural surfactant used in our study, significantly reduced NO production in various sets of experiments. Lipid peroxidation of surfactant was noted when NO was produced by stimulated AM, a phenomenon that could be suppressed by NG-monomethyl L-arginine (L-NMMA), the inhibitor of NO synthase. In the lung of GBS-infected neonates, nitric oxide produced by AM might contribute to the destruction of surfactant caused by inflammatory cells. Pediatr Pulmonol. 2000; 30:106- 113.