AbstractThe Clara cell of the mouse terminal bronchiole has been examined by high resolution phase contrast and electron microscopy, and the secretory route of surfactant in the mouse lung has been investigated using both light and electron microscopical autoradiography of a surfactant precursor (palmitic acid). Serial sections of terminal bronchioles examined by phase contrast microscopy demonstrated the appearances of apocrine secretion of amorphous droplets by Clara cells. Electron microscopy showed that the non‐decapitating supranclear region of Clara cells contained numerous rounded mitochondria with scanty achrestic cristae, whilst the apical portion was rich in smooth tubular membranes. Autoradiographical labeling of bronchiolar Clara cells exceeded that of all other cell types within three minutes of administration of the radioactive precursor, with location primarily over the endoplasmic reticulum. Subsequently there was heavy labeling of the bronchiolar lining layer. An hour later, silver grains were most numerous over the lamellated bodies of type II cells. It is suggested that palmitic acid is synthesized in the specialized mitochondria of the non‐secretory region of the Clara cell and is incorporated into dipalmitoyl lecithin in the membranous apex. Subsequent secretion, possibly by the apocrine mechanism, provides a surface‐active bronchiolar lining layer.