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Background: The thickness and composition of the surface liquid lining the human lungs are maintained by a balance between epithelial secretion and absorption of ions and water. An understanding of epithelial transport pathways and the factors that regulate them will provide insight into the development of conditions such as lung edema and guide the development of treatment modalities. Here we report on the development and characterisation of a cell culture model of the alveolar epithelium that will be useful for investigating the components of epithelial transport pathways and interpreting molecular mechanisms involved in transport related diseases. Methods: An in vitro cell culture model was developed using human alveolar epithelial cell lines NCI-H441 and A549 cultured with the apical surface exposed to air (air-medium) or covered by nutrient medium (medium-medium). Cell monolayer was presented by visualizing cell morphology under microscope. Transepithelial electrical resistance, potential difference and fluorescence permeability measurements were used to assess the formation of a polarised epithelium with functional barrier properties. Expression of tight junction, adherens junction and ion/water transport proteins were examined by Western blot and RT-PCR. Results: NCI-H441 cells cultured under air-medium conditions exhibited electrical resistance (258 ± 28 Ω• cm2), potential difference (4.8± 0.1 mV) and strong expression of α1-Na+-K+-ATPase and tight junction protein ZO-1 consistent with the formation of a polarised epithelium. These cultures also expressed the chloride channel CFTR and all four subunits of the sodium channel ENaC. Cells cultured under medium-medium conditions had a 4-fold higher electrical resistance (1009 ± 15 Ω• cm2), but similar level of potential difference (4.9 ± 0.2 mV) and weaker expression of α1-Na+-K+-ATPase and ZO-1. The A549 cell line developed low levels of electrical resistance and potential difference and did not express ZO-1. No significant difference in CFTR and ENaC transport protein expression was observed between the cell lines or culture conditions. Conclusion: The NCI-H441 cell line cultured under air-medium conditions develops into a polarised epithelium with functional barrier properties and expresses transport proteins for sodium and chloride transport. Hence it can serve as a suitable model for investigating water and ion transport in the alveolar epithelium.