The multidrug resistant (MDR) transporter P-glycoprotein (P-gp) is constitutively expressed in normal tissues, where its spatial distribution defines it as an important element reducing the systemic exposure and tissue access of potentially harmful xenobiotics. We sought to determine whether P-gp is functionally expressed within alveolar epithelium of lung, in particular within the predominant cell type of this barrier, the alveolar epithelial (AE) type I cell. By immunohistochemistry, MDR-1/mdr-1 P-gp was localized to luminal membranes of AE type I epithelium within normal human and rat lung tissue. Using a primary rat cell culture model affording study of AE type II to AE type I differentiation, we observed increased expression (reverse transcription-polymerase chain reaction (RT-PCR), Western blot, and immunoflow cytometry techniques) of mdr-1a and mdr-1b P-gp in the cultures as they adopted an AE type I phenotype; freshly isolated AE type II cells were negative for mdr-1/P-gp. The functionality of P-gp within the AE cultures was demonstrated by a flow cytometric accumulation-retention assay using rhodamine-123 as substrate, and also by the polarized transport of vinblastine across confluent AE type I monolayers (basal-to-apical permeability was 3-fold that of apical-to-basal permeability), which was found to be comparable with the P-gp transport barrier presented by Caco-2 cell monolayers. The implications of localizing P-gp within alveolar epithelium is of significance to studies of fundamental respiratory cell biology as well as to further clarifying the nature of the barrier to xenobiotic transfer from alveolar airspace to pulmonary interstitium and capillary blood.