Macrophage migration inhibitory factor (MIF) is a pleiotropic proinflammatory cytokine involved in acute lung injury and other processes such as wound repair and tumor growth. MIF exerts pro-proliferative effects on a variety of cell types including monocytes/macrophages, B cells, and gastric epithelial cell lines through binding to the major histocompatibility complex type II-associated invariant chain, CD74. In acute lung injury, inflammatory damage of the alveolar epithelium leads to loss of type I alveolar epithelial cells (AEC-I), which are replaced by proliferation and differentiation of type II alveolar epithelial cells (AEC-II). In this study we have investigated the potential of MIF to contribute to alveolar repair by stimulating alveolar epithelial cell proliferation. We show that murine AEC-II, but not AEC-I, express high surface levels of CD74 in vivo. Culture of AEC-II in vitro resulted in decreased mRNA levels for CD74 and loss of surface CD74 expression, which correlated with a transition of AEC-II to an AEC-I-like phenotype. MIF stimulation of AEC-II induced rapid and prolonged phosphorylation of ERK1/2 and Akt, increased expression of cyclins D1 and E, as well as AEC-II proliferation. Corresponding MIF signaling and enhanced thymidine incorporation was observed after MIF stimulation of MLE-12 cells transfected to overexpress CD74. In contrast, MIF did not induce MAPK activation, gene transcription, or increased proliferation in differentiated AEC-I-like cells that lack CD74. These data suggest a previously unidentified role of MIF-CD74 interaction by inducing proliferation of AEC-II, which may contribute to alveolar repair.