The aim of the present study is to investigate the differentiation of a cloned fetal Syrian hamster lung epithelial cell line, M3E3/C3, to assume morphological and biochemical features of Type II pneumocytes (phospholipid synthesis). The use of a soft agar overlay and a differentiation medium, based on RPMI 1640 combined with hormone supplements, increased the cellular content of phosphatidylcholine (PC) from 48.6 % in the conventional culture without any of these factors (referred to as 'control') to 64.7 % (p < 0.02). The other cell membrane-associated components, phosphatidylethanolamine (p < 0.05), sphingomyelin (p < 0.001), phosphatidylserine (n. s.), phosphatidic acid (p < 0.02) and phosphatidylinositol (p < 0.02) decreased. The content of phosphatidylglycerol showed no essential change (from 11.2 % to 8.4 %) and the content of disaturated phospholipids decreased from 32.0 to 23.4 mug/10(6) cells (p < 0.002). The phospholipid pattern of these differentiated cells is in rough accordance with that of primary isolated Type II pneumocytes. They incorporated H-3-choline over a period of four hours at a higher rate in the Type II pneumocyte-specific phospholipids, PC and dipalmitoyl-phosphatidylcholine (DPPC), than the undifferentiated control. The radiolabeling of PC and DPPC in the differentiated cells, after 3 hours of incubation with H-3-choline, was about 3.2-fold and 2.2-fold, respectively, higher than that in the control cells (p < 0.001). Intracytoplasmatic phospholipid granules were evident in the differentiated cells by light and fluorescence microscopy (modified PAPANICOLAOU stain, Phosphin 3 R fluorescence). Furthermore, the differentiated cells had a high activity of alkaline phosphatase, whereas the control cells showed only little activity of this enzyme. Ultrastructurally, many concentric multilayered osmiophilic bodies, well developed Golgi apparatuses and many cytoplasmic protrusions comparable to microvilli, were detectable in the cuboidal shaped differentiated cells. The control cells remained wide and flattened on the plastic surface and produced a fibrillar extracellular matrix. In the simultaneously studied fetal lung fibroblasts none of these specific features were noted. These results indicate a specific differentiation capacity of the clonal fetal cell line, M3E3/C3, by closely resembling Type II pneumocytes.