Two small, hydrophobic peptides, surfactant protein (SP)-B and SP-C, play important roles in the generation and maintenance of a surface active film in the alveolus. Isolation and characterization of the cDNAs encoding SP-B and SP-C indicate that both peptides are synthesized as larger proproteins which are proteolytically processed to peptides with Mr approx. 8000 and 4000, respectively. The biosynthetic pathway leading to generation and secretion of the biophysically active mature SP-B and SP-C peptides is reviewed.