It was previously shown that tracheal obstruction accelerated fetal lung growth and eventually reversed the pulmonary hypoplasia in experimental diaphragmatic hernia. We have successfully developed a reversible tracheal obstruction technique in fetal sheep using balloon occlusion and showed that 3 wk of obstruction induced significant lung growth of the same magnitude as the tracheal ligation. The purpose of this study was to examine the effects of 1 and 3 wk of tracheal occlusion on the alveolar cell population with specific attention to the type II pneumocytes. We first showed that 1 wk of occlusion induced a significant increase in lung weight and in alveolar surface area. We then used the surfactant protein C (SP-C) mRNA as a specific marker of differentiated type II pneumocytes. Total RNA was isolated from fetal sheep lung with or without tracheal occlusion, and Northern blots were hybridized with a cDNA probe specific for the sheep SP-C. The results show a dramatic decrease in SP-C mRNA expression (8.8-fold, p < 0.01). In situ hybridization showed a marked decrease in the density of cells expressing SP-C, as well as the amount of SP-C mRNA expressed by the cells. The effect was present as early as 1 wk of occlusion. The sparseness of type II pneumocytes was further confirmed by electron microscopy. We thus conclude that tracheal obstruction causes a profound decrease in the number of type II pneumocytes in the lungs. Given the crucial role of type II pneumocytes in surfactant production, we could speculate that, if tracheal occlusion is able to accelerate lung growth, the final product is probably surfactant-deficient.