Lung development depends upon the differentiation and expansion of a variety of specialized epithelial cell types, including distal type I and type II pneumocytes in the late term. Previous studies have shown a strict dependence on the choline cytidylyltransferase alpha isoform (CCTalpha) to mediate membrane phospholipid formation in cultured cells and during preimplantation embryogenesis. CCTalpha expression is highest in lung, and there has long been speculation about its precise role, due to the dual requirement for phospholipid in proliferating cell membranes and for lung surfactant production from alveolar type II cells. We investigated the function of CCTalpha in lung development, using an inducible, epithelial cell-specific CCTalpha knockout mouse line. Deletion of CCTalpha beginning at embryonic day 7.5 did not restrict lung development but resulted in severe respiratory failure at birth. Alveolar lavage and lung lipid analyses showed significant decreases in the major surfactant phospholipid, dipalmitoyl-phosphatidylcholine. The fatty acids destined for the surfactant phospholipid were redirected to an expanded triglyceride pool. Transcripts encoding type II cell-specific markers were expressed in the knockout mice, indicating the expected progression of differentiation in lung epithelia. However, surfactant protein levels were reduced, with the exception of that for surfactant protein B, which was elevated. Ultrastructural analysis of the type II cells showed Golgi complex abnormalities and aberrant lamellar bodies, which deliver surfactant lipid and protein to the alveolar lumen. Thus, CCTalpha was not required for the proliferation or differentiation of lung epithelia but was essential for the secretory component of phospholipid synthesis and critical for the proper formation of lamellar bodies and surfactant protein homeostasis.