Pulmonary alveolar type II cells have been shown to be a possible target for the secosteroid hormone, 1alpha,25-dihydroxyvitamin D3 [1alpha,25(OH)2D3], during perinatal transition. At present, there is great interest to isolate and identify the metabolites of 1alpha,25(OH)2D3 produced in its target tissues and to determine the contribution of each individual metabolite of 1alpha,25(OH)2D3 to the final expression of the pleiotropic actions attributed to 1alpha,25(OH)2D3. Of all the known metabolites of 1alpha,25(OH)2D3, 1alpha,25(OH)2-3-epi-D3 has gained most attention as it is produced only in specific tissues and possesses significant activity in tissues in which it is produced. Furthermore, in vivo studies indicate that this metabolite when compared to 1alpha,25(OH)2D3 is less calcemic. Therefore, we performed the present study to identify production of 1alpha,25(OH)2-3-epi-D3 in alveolar type II cells, and to evaluate its effect on surfactant synthesis. We incubated NCI-H441 cells, an alveolar type II cell line, with 1alpha,25(OH)2D3 and demonstrated that these cells metabolize 1alpha,25(OH)2D3 to various previously well-characterized polar metabolites, and to a less polar metabolite which was unequivocally identified as 1alpha,25(OH)2-3-epi-D3 by GC/MS and HPLC analysis. Further, biological activity studies in H441 cells indicated that 1alpha,25(OH)2-3-epi-D3 possesses significant activity in terms of its ability: (i) to increase surfactant phospholipid synthesis, (ii) to induce surfactant SP-B mRNA gene expression, and (iii) to increase surfactant SP-B protein synthesis. However, the activity of 1alpha,25(OH)2-3-epi-D3 when compared to 1alpha,25(OH)2D3 in generating VDR-mediated transcriptional activity in ROS 17/2.8 cells transfected with human osteocalcin VDRE/growth hormone gene construct, was significantly reduced. The high metabolic stability of 1alpha,25(OH)2-3-epi-D3, as previously proposed by us, may be a possible explanation for the high in vitro activity in spite of the reduced VDR-mediated transcriptional activity. In summary, we report for the first time the pathways of 1alpha,25(OH)2D3 metabolism in pulmonary alveolar type II cells and indicate that 1alpha,25(OH)2-3-epi-D3, a natural intermediary metabolite of 1alpha,25(OH)2D3 possesses significant activity in stimulating surfactant synthesis in alveolar type II cells.