SP-B, a hydrophobic protein produced by alveolar type II and bronchiolar Clara cells, helps in the spreading and stability of surfactant film and is required for surfactant function. The SP-B gene is regulated both developmentally and hormonally. To study regulatory elements in the SP-B gene promoter in vivo, we made transgenic (tg) mice using a fragment of the human SP-B promoter (-1039/+431bp) linked to the chloramphenicol acetyl transferase (CAT) reporter gene. This SP-B DNA fragment contains both proximal and distal TTF-1 and HNF-3 transcription factor binding sites which promote lung epithelial cell line specificity in vivo. CAT activity in tg lung tissue was significantly increased compared to wild-type (22.2±3.2 vs 0.4±0.1 cpm/mg prot/min; p<0.01), whereas CAT activity in heart, liver, spleen, kidney, intestine, skeletal muscle and brain was not different. In two established tg lines CAT activity was found both in lungs (150 and 264 cpm/mg/min) and in trachea (50 and 125 cpm/mg/min), sites of type II and/or Clara cells in mice. Immunohistochemistry of lung sections using antibodies to CAT and human SP-B showed immunostaining for both proteins localized to type II and Clara cells. In tg fetal lungs, CAT activity was found at 17-19 days gestation and increased ≥4 fold (n=2) during explant culture. In tg adult lung explants (n=3), levels of CAT activity were maintained for at least 3 days (95±13% (se) of preculture). Transforming growth factor β(TGFβ1, 30 ng/ml), a cytokine which downregulates SP-B in human fetal lung explants, reduced CAT activity in both fetal (52±9% of control at 3 days, n=2) and adult mouse lung explants (60±11% of control at 3 days, n=1; 34±3% at 5 days, n=3) whereas35 S-methionine incorporation into total protein was unaffected(101±7%). In contrast, 12-O-tetradecanoyl phorbol-13 acetate (TPA, 30 nM), which also downregulates SP-B in human fetal lung explants, did not reduce CAT activity in tg adult lung ex vivo (182±54%, n=4). We conclude that the human SP-B promoter fragment (-1039/+431bp) exhibits tissue and lung cell specificity in vivo and confers developmental regulation and TGFβ responsiveness ex vivo. These transgenic animals provide a useful in vivo model to study specific regulatory elements in the SP-B promoter.