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Keratinocyte growth factor (KGF) or fibroblast growth factor (FGF)-7, a peptide produced by stromal cells and in particular by lung mesenchyme, has recently been shown to influence early lung morphogenesis and to be a mitogen for fetal and adult alveolar type II cells. Although contradictory findings have been reported regarding its effects on surfactant protein expression, its effects on surfactant phospholipids have not been studied. We investigated the effects of KGF on the synthesis of surfactant components by cultured fetal rat type II cells isolated during the late gestational period, when surfactant accumulates in preparation for extrauterine life. We show that KGF is a potent stimulus of surfactant phospholipid synthesis, particularly for the major component of surfactant, disaturated phosphatidylcholine (DSPC). KGF increased choline incorporation into DSPC in a dose-dependent manner up to 25 ng/ml (1.3 × 10-9 M), and this effect was greater for surfactant than for nonsurfactant DSPC. KGF was several times more potent in this respect than acidic FGF at the same molar concentration. KGF, similar to epidermal growth factor, also stimulated acetate incorporation and increased the surfactant phospholipid and DSPC content of cultured cells twofold. These effects correlated with increased choline phosphate cytidylyltransferase activity and increased fatty acid synthase activity and gene expression. KGF also induced a dose-dependent stimulation of surfactant protein-A, -B, and -C gene expression, leading to a 2- to 3-fold increase in their messenger RNAs. KGF therefore stimulates the synthesis of all surfactant components in developing type II cells at the time of surfactant accumulation. Its secretion by lung fibroblasts may thus be an important factor in promoting the maturation of fetal lung epithelium and the synthesis of sufficient surfactant. The results suggest that KGF could provide a new therapeutic agent for the management of the immature or injured lung.