Familial pulmonary fibrosis is a heterogeneous group of interstitial lung diseases of unknown cause that is associated with multiple pathologic subsets. Mutations in the surfactant protein C (SP-C) gene (SFTPC) are associated with familial desquamative and nonspecific interstitial pneumonitis. Genetic studies in familial usual interstitial pneumonitis have been inconclusive. Using a candidate gene approach, we found a heterozygous exon 5 + 128 T→A transversion of SFTPC in a large familial pulmonary fibrosis kindred, including adults with usual interstitial pneumonitis and children with cellular nonspecific interstitial pneumonitis. The mutation is predicted to substitute a glutamine for a conserved leucine residue and may hinder processing of SP-C precursor protein. SP-C precursor protein displayed aberrant subcellular localization by immunostaining. Electron microscopy of affected lung revealed alveolar type II cell atypia, with numerous abnormal lamellar bodies. Mouse lung epithelial cells transfected with the SFTPC mutation were notable for similar electron microscopy findings and for exaggerated cellular toxicity. We show that an SFTPC mutation segregates with the pulmonary fibrosis phenotype in this kindred and may cause type II cellular injury. The presence of two different pathologic diagnoses in affected relatives sharing this mutation indicates that in this kindred, these diseases may represent pleiotropic manifestations of the same central pathogenesis.