Developing rat lung lipofibroblasts express leptin beginning on embryonic day (E) 17, increasing 7- to 10-fold by E20. Leptin and its receptor are expressed mutually exclusively by fetal lung fibroblasts and type II cells, suggesting a paracrine signaling "loop." This hypothesized mechanism is supported by the following experimental data: 1) leptin stimulates the de novo synthesis of surfactant phospholipid by both fetal rat type II cells (400% x 100 ng(-1) x ml(-1) x 24 h(-1)) and adult human airway epithelial cells (85% x 100 ng(-1) x 24 h(-1)); 2) leptin is secreted by lipofibroblasts in amounts that stimulate type II cell surfactant phospholipid synthesis in vitro; 3) epithelial cell secretions such as parathyroid hormone-related protein (PTHrP), PGE(2), and dexamethasone stimulate leptin expression by fetal rat lung fibroblasts; 4) PTHrP or leptin stimulate the de novo synthesis of surfactant phospholipid (2- to 2.5-fold/24 h) and the expression of surfactant protein B (SP-B; >25-fold/24 h) by fetal rat lung explants, an effect that is blocked by a leptin antibody; and 5) a PTHrP receptor antagonist inhibits the expression of leptin mRNA by explants but does not inhibit leptin stimulation of surfactant phospholipid or SP-B expression, indicating that PTHrP paracrine stimulation of type II cell maturation requires leptin expression by lipofibroblasts. This is the first demonstration of a paracrine loop that functionally cooperates to induce alveolar acinar lung development.