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Redox imbalance has been implicated in the pathogenesis of many acute and chronic lung diseases. The b-Zip transcription factor Nrf2 acts via an antioxidant/electrophilic response element to regulate antioxidants and maintain cellular redox homeostasis. Our previous studies have shown that Nrf2-deficient mice (Nrf2−/−) show reduced pulmonary expression of several antioxidant enzymes, which renders them highly susceptible to hyperoxia-induced lung injury. To better understand the physiologic significance of Nrf2-induced redox signaling, we have used primary cells isolated from the lungs of Nrf2+/+ and Nrf2−/− mice. Our studies were focused on type II cells because these cells are constantly exposed to the oxidant environment and play key roles in host defense, injury, and repair processes. Using this system, we now report that an Nrf2 deficiency leads to defects in type II cell proliferation and greatly enhances the cells' sensitivity to oxidant-induced cell death. These defects were closely associated with high levels of reactive oxygen species (ROS) and redox imbalance in Nrf2−/− cells. Glutathione (GSH) supplementation rescued these phenotypic defects associated with the Nrf2 deficiency. Intriguingly, although the antioxidant N-acetyl-cysteine drastically squelched ROS levels, it was unable to counteract growth arrest in Nrf2−/− cells. Moreover, despite their elevated levels of ROS, Nrf2−/− type II cells were viable and, like their wild-type counterparts, exhibited normal differentiation characteristics. Our data suggest that dysfunctional Nrf2-regulated GSH-induced signaling is associated with deregulation of type II cell proliferation, which contributes to abnormal injury and repair and leads to respiratory impairment.