Pulmonary surfactant, a complex consisting of 90% lipids and 10% specific proteins, lines the alveoli of the lung and prevents alveolar collapse and transudation by lowering the surface tension at the air-liquid interface. Dipalmitoylphosphatidylcholine constitutes approximately 50% of the surfactant lipids and is primarily responsible for the surface tension-lowering property of the surfactant mixture. This phospholipid, together with the other surfactant phospholipids, is produced at the endoplasmic reticulum of the alveolar type II epithelial cells. The characteristic lamellar bodies in these cells serve as storage depot for the surfactant before this is secreted onto the alveolar surface. This article reviews the pathways via which the surfactant lipids are synthesized, our current knowledge of the regulation of these pathways, and what is known about intracellular traffic of phospholipids from their site of synthesis to the lamellar bodies.