Herein, we report that the adenovirus E3-14.7K protein inhibits the inflammatory response to adenovirus in transgenic mice in which the E3-14.7K gene was selectively expressed in the respiratory epithelium, using the human surfactant protein C (SP-C) promoter. E3-14.7K mRNA and protein were detected specifically in the lungs of SPC/E3-14.7K transgenic mice. Responses of the transgenic mice to Av1Luc1, an E1–E3-deleted Ad vector encoding the luciferase reporter gene, were examined, including vector transgene expression and lung inflammation. In wild-type mice, luciferase activity declined rapidly and was lost 14 days following Av1Luc1 administration. The loss of luciferase activity was associated with pulmonary infiltration by macrophages and lymphocytes. In heterozygous SPC/E3-14.7K mice, luciferase activity was increased by 7 days compared with control littermates, and pulmonary infiltration by macrophages was decreased. In homozygous (+/+) SPC/E3-14.7K mice, luciferase activity was increased 7, 14, and 21 days following administration compared with wild-type mice, and lung inflammation was markedly reduced. After Av1Luc1 administration, PCNA staining of bronchiolar and alveolar respiratory epithelial cells was decreased in SPC/E3-14.7K transgenic mice, indicating decreased epithelial cell proliferation, a finding consistent with the observed reduction in inflammation. CD4 and CD8 lymphocyte populations were only mildly altered, while humoral responses to adenoviral vectors were unchanged in the SPC/E3-14.7K mice. The E3-14.7K protein expressed selectively in respiratory epithelial cells suppresses Ad-induced pulmonary epithelial cell cytotoxicity and lung inflammation in vivo and prolongs reporter gene expression.