Following an alveolar wash, lung tissue from 3-day-old rabbits was gently homogenized and fractionated into organelle, cytosol, microsome and low density microsome fractions. The organelle fraction was further separated on isopycnic continuous sucrose gradients. All fractions were characterized by phosphatidylcholine and protein content, saturated-to-total phosphatidylcholine ratios, and phospholipid compositions. Rabbits were injected with radioactively labeled palmatic acid 10 min to 8 h before killing, and the specific activities (cpm/μmol) of phosphatidylcholine recovered from fractions from continuous gradients were measured. Each fraction was assayed for the presence of four subcellular marker enzymes: NADPH : cytochrome c reductase, succinate : cytochrome c reductase, 5'-nucleotidase and UDPgalactose galactosyltransferase, and four phospholipid biosynthetic enzymes: cholinephosphotransferase, glycerolphosphate phosphatidyltransferase, phosphatidic acid phosphatase and lysophosphatidylcholine acyltransferase. Results were as follows: 1. Lung microsomes can be fractionated into low (under l M sucrose) and high (over 1 M sucrose) density fractions. The low density fractions have more sphingomyelin, more 5'-nucleotidase and UDPgalactose galactosyltransferase activity and probably represent in part plasma membrane and Golgi fragments. 2. The organelle fraction contains a spectrum of particulate matter with phospholipids characteristic of endoplasmic reticulum fragments at high density (1.5 M sucrose) and lamellar bodies at low density (0.5 M sucrose). 3. NADPH : cytochrome c reductase was present in relatively low density fractions from the continuous gradient but not at densities characteristic of lamellar bodies, while residual 5'-nucleotidase activity remained in lamellar body fractions. Cholinephosphotransferase and glycerolphosphate phosphatidyltransferase were confined to high density fractions from the continuous gradients while phosphatidic acid phosphatase and lysophosphatidylcholine acyl transferase activities were detected across the gradients. The various microsomal enzymes had disparate specific activity profiles across the continuous gradients. 4. After injection of radioactively labeled palmitic acid, radioactively labeled phosphatidylcholine sequentially enters less dense fractions with time. The distribution of the radioactively label supports the hypothesis that surfactant phospholipids move sequentially through a series of high density subcellular particles toward the low density lamellar bodies.