The transepithelial transport and metabolism of two model peptides, glycyl-D-phenylalanine (Gly-D-Phe) and glycyl-L-phenylalanine (Gly-L-Phe), across primary cultured monolayers of rat alveolar epithelial cells were studied. These tight monolayers (>2000 Ω-cm2) exhibited type I pneumocyte morphological and phenotypic characteristics. A reverse-phase HPLC was used to monitor the appearance of parent dipeptides and their metabolites (D- or L-Phe) in the receiver fluid. The apparent permeability coefficient (Papp) for Gly-D-Phe was about 1.6 × 10−7 cm/sec at both 1 and 10 m M and in both the apical-to-basolateral (AB) and the basolateral-to-apical (BA) directions. In contrast, the Papp of Gly-L-Phe at 1 m M was about two times higher than that at 10 m M in the AB direction. The Papp of Gly-L-Phe in the BA direction at either concentration was about the same (about 1.4 × 10−7 cm/sec). Whereas no metabolite was detected during Gly-D-Phe transport, the proportions of a metabolite, L-Phe, observed at 4 hr in the basolateral receiver fluid for 1 and 10 mM apical donor Gly-L-Phe accounted for 83 and 77% of the estimated total Gly-L-Phe (i.e., L-Phe + Gly-L-Phe), respectively. The corresponding values in the BA direction were 40 and 19% of the estimated total Gly-L-Phe in the apical receiver reservoir. Metabolism of Gly-L-Phe was significantly reduced in the presence of 3 µM actinonin (an inhibitor relatively specific for aminopeptidase M) in the apical but not the basolateral fluid. Under all experimental conditions, the monolayers remained intact, as indicated by no appreciable changes in the bioelectric parameters of transepithelial potential difference and electrical resistance. The above data provide evidence for cellular metabolism of Gly-L-Phe as well as paracellular restricted diffusional transport of intact Gly-D-Phe and Gly-L-Phe and comparatively lower transcellular transport of Gly-L-Phe across the rat alveolar epithelial cell monolayer.