Surfactant protein B (SP-B) is an 8.7-kDa, hydrophobic protein that enhances the spreading and stability of surfactant phospholipids in the alveolus. To further assess the role of SP-B in lung function, the SP-B gene was disrupted by homologous recombination in murine mouse embryonic stem cells. Mice with a single mutated SP-B allele (+/-) were unaffected, whereas homozygous SP-B -/- offspring died of respiratory failure immediately after birth. Lungs of SP-B -/- mice developed normally but remained atelectatic in spite of postnatal respiratory efforts. SP-B protein and mRNA were undetectable and tubular myelin figures were lacking in SP-B -/- mice. Type II cells of SP-B -/- mice contained no fully formed lamellar bodies. While the abundance of SP-A and SP-C mRNAs was not altered, an aberrant form of pro-SP-C, 8.5 kDa, was detected, and fully processed SP-C peptide was markedly decreased in lung homogenates of SP-B -/- mice. Ablation of the SP-B gene disrupts the routing, storage, and function of surfactant phospholipids and proteins, causing respiratory failure at birth.