Substantial progress has been made in understanding the role of the distal airway and alveolar epithelial barriers in regulating lung fluid balance. Molecular, cellular, and whole animal studies have demonstrated that reabsorption of fluid from the distal air spaces of the lung is driven by active sodium transport. Several different in vivo, in situ, and isolated lung preparations have been used to study the mechanisms that regulate fluid transport in the normal and injured lung. Catecholamine-dependent and -independent regulatory mechanisms have been identified that modulate fluid transport, probably by acting on apical sodium channel uptake or the activity of the Na, K-ATPase pumps. Recently, a family of molecular water channels (aquaporins) has been identified that are small (approximately 30 kDa) integral membrane proteins expressed widely in fluid-transporting epithelia and endothelia. At present, four different water channels have been identified in trachea and lung. Measurements of osmotic water permeability in in situ perfused lung and isolated perfused airways suggest a significant contribution of these molecular water channels to measured water permeability. However, further studies are required to determine the role of these water channels in normal pulmonary physiology and disease. Recent studies have provided new insights into the role of the alveolar epithelial barrier in clinical and experimental acute lung injury. Unlike the lung endothelium, the alveolar epithelium is resistant to several clinically relevant types of injury, including endotoxemia and bacteremia as well as aspiration of hyperosmolar solutions. In addition, even when the alveolar barrier has been injured, its capacity to transport edema fluid from the distal air spaces of the lung recovers rapidly. Future studies need to integrate new insights into the molecular mechanisms of alveolar epithelial sodium and water transport with functional studies in the normal and injured lung.