This paper describes one isolation procedure for two pulmonary cell types and discusses how these cells are being used for toxicological studies. Alveolar Type II cells and Clara cells have been isolated from rabbits and rats and separated into highly enriched fractions. The lungs were digested with protease, and the pulmonary cell digests were separated into discrete fractions on the basis of cellular size and density differences. Several studies have been conducted to compare the metabolism of xenobiotics in these cell types and three examples are discussed. The metabolic activation and covalent binding of the pulmonary toxin, 4-ipomeanol was found to occur in both Clara and Type II cells in vitro, although to a much greater extent in the Clara cells. Also, the metabolism of several substrates, including 7-ethoxycoumarin, coumarin and benzo(a)pyrene, was compared in the isolated cell fractions and found to be much greater in the Clara cells than in the Type II cells. Immunohistochemical analysis and gel electrophoresis have also been used to demonstrate the presence of the two major rabbit pulmonary cytochrome P-450 isozymes in both the isolated Clara cells and alveolar Type II cells.