Thyroid transcription factor-1 (TTF-1, product of the Nkx2.1 gene) is essential for branching morphogenesis of the lung and enhances expression of surfactant proteins by alveolar type II cells. We investigated expression of two TTF-1 mRNA transcripts, generated by alternative start sites and coding for 42- and 46-kD protein isoforms in the mouse, during hormone-induced differentiation of human fetal lung type II cells in culture. Transcript for 42-kD TTF-1 was 20-fold more abundant than TTF-1₄₆ mRNA by RT-PCR. Only 42-kD protein was detected in lung cells, and its content increased during in vivo development and in response to in vitro glucocorticoid plus cAMP treatment. To examine TTF-1 target proteins, recombinant, phosphorylated TTF-1₄₂ was expressed in nuclei of cells by adenovirus transduction. By microarray analysis, 14 genes were comparably induced by recombinant TTF-1 (rTTF-1) and hormone treatment, and 9 additional hormone-responsive genes, including surfactant proteins-A/B/C, were partially induced by rTTF-1. The most highly (∼ 10-fold) TTF-1–induced genes were DC-LAMP (LAMP3) and CEACAM6 with induction confirmed by Western analysis and immunostaining. Treatment of cells with hormones plus small inhibitory RNA directed toward TTF-1 reduced TTF-1 content by ∼ 50% and inhibited hormone induction of the 23 genes induced by rTTF-1. In addition, knockdown of TTF-1 inhibited 72 of 274 other genes induced by hormones. We conclude that 42-kD TTF-1 is required for induction of a subset of regulated genes during type II cell differentiation.