Acute alveolar injury commonly occurs as a result of exposure to a variety of toxic stimuli and is characterised by widespread necrosis of the epithelium, followed by regeneration and hyperplasia of type II alveolar epithelial cells. We studied epithelial proliferation in rabbit lung resulting from a chemical stimulus by isolating the mitotically active cells and establishing them in continuous culture. Acute alveolar injury was induced in rabbits with two daily injections of N-nitroso- N-methylurethane (NNNMU). Four to six days after treatment, the lungs were enzymatically digested and a homogeneous monolayer of epithelial cells was established in culture. The cells displayed a typical cobblestone-like arrangement and cuboidal shape, and represented 95% of the cells isolated. The cultures exhibited contact inhibition and achieved a population doubling level of 11 ± 2. Their epithelial origin was confirmed by positive reactions for immunofluorescent cytokeratin, alkaline phosphatase, and the Papanicolaou stain. Ultrastructurally, the cells showed abundant rough endoplasmic reticulum with dilated cisternae, desmosomes, cytokeratin filaments, and lamellar-like structures early in culture. In addition, the cells accumulated paraquat in a manner similar to that shown by established epithelial cell lines. The results demonstrate that regenerating epithelial cells can be isolated and propagated in culture as a relatively homogeneous population. This system, which is designed to further understanding of the metabolic role of epithelial cells following acute injury, may serve as an in vitro model for pulmonary toxicity studies using a minimal number of animals.