An in vitro cultured monolayer system of alveolar epithelial cells was used as a model to investigate transport and hydrolysis of two enkephalin peptides, Met-enkephalin (TGGPM) and [D-Ala2]Met-enkephalinamide (TAGPM), in pulmonary epithelium. Isolated alveolar type II cells formed continuous monolayers when grown on microporous tissue culture-treated polycarbonate filters in serum-free, hormonally defined medium. Transport and hydrolysis studies of enkephalins in the monolayer system obtained after 6 days in culture, using fluorescence reversed-phase HPLC, indicate a reduced but significant degradation of enkephalins in the alveolar epithelium compared to most other epithelia previously reported. Aminopeptidases and dipeptidyl carboxypeptidase represent two major hydrolytic enzymes for TGGPM, as indicated by the formation of the degradative products Tyr and Tyr-Gly-Gly, while dipeptidyl peptidase, which is responsible for the formation of Tyr-Gly, contributes much less. The enkephalinase inhibitor thiorphan failed to prevent the hydrolysis of TGGPM whereas the enkephalin analog TAGPM was relatively resistant to enzymatic cleavage. The rate of enkephalin transport across the alveolar epithelium was directly proportional to drug concentration and occurred irrespective of transport direction, suggesting passive diffusion as the major mechanism for transepithelial transport. Agents that affect paracellular transport pathways, e.g., EGTA and the calcium ionophore A-23187, greatly promoted the transport rate. The ionophore at high doses, in addition to promoting tight junction permeability, also caused cellular damage associated with a sustained rise in intracellular calcium levels, as indicated by nuclear propidium iodide fluorescence. The cultured monolayer of alveolar epithelium may be used to study pulmonary drug absorption, degradation, and toxicity.