The functional roles of neutral lipids in the lung are poorly understood. However, blocking cholesteryl ester and triglyceride metabolism in lysosomal acid lipase gene knockout mice (lal−/−) results in severe pathogenic phenotypes in the lung, including massive neutrophil infiltration, foamy macrophage accumulation, unwanted cell growth, and emphysema. To elucidate the mechanism underlining these pathologies, we performed Affymetrix GeneChip microarray analysis of 1-, 3-, and 6-month-old mice and identified aberrant gene expression that progressed with age. Among changed genes, matrix metalloproteinase (MMP)-12, apoptosis inhibitor 6 (Api-6), erythroblast transformation-specific domain (Ets) transcription factor family member Spi-C, and oncogene MafB were increased 100-, 70-, 40-, and 10-fold, respectively, in lal−/− lungs versus the wild-type lungs. The pathogenic increases of these molecules occurred primarily in alveolar type II epithelial cells. Transcriptional activities of the MMP-12 and Api-6 promoters were stimulated by Spi-C or MafB in respiratory epithelial cells. Treatment with 9-hydroxyoctadecanoic acids and ciglitazone significantly rescued lal−/− pulmonary inflammation and aberrant gene expression. In addition, both compounds as well as peroxisome proliferator-activated receptor gamma inhibited MMP-12 and Api-6 promoter activities. These data suggest that inflammation-triggered cell growth and emphysema during lysosomal acid lipase deficiency are partially caused by peroxisome proliferator-activated receptor-γ inactivation.