Surfactant protein B (SP-B) is essential to the function of pulmonary surfactant and to alveolar type 2 cell phenotype. Human SP-B is the 79-amino acid product of extensive post-translational processing of a 381-amino acid preproprotein. Processing involves modification of the primary translation product from 39 to 42 kDa and at least 3 subsequent proteolytic cleavages to produce the mature 8-kDa SP-B. To examine the intracellular sites of SP-B processing, we carried out immunofluorescence cytochemistry and inhibitor studies on human fetal lung in explant culture and isolated type 2 cells in monolayer culture using polyclonal antibodies to human SP-B(8) (Phe(201)-Met(279)) and specific epitopes within the N- (NFProx, Ser(145)-Leu(160); NFlank Gln(186)-Gln(200)) and C-terminal (CFlank, Gly(284)-Ser(304)) propeptides of pro-SP-B. Fluorescence immunocytochemistry using epitope-specific antisera showed colocalization of pro-SP-B with the endoplasmic reticulum resident protein BiP. The 25-kDa intermediate was partially endo H-sensitive, colocalized with the medial Golgi resident protein MG160, and shifted into the endoplasmic reticulum in the presence of brefeldin A, which interferes with anterograde transport from endoplasmic reticulum to Golgi. The 9-kDa intermediate colocalized in part with MG160 but not with Lamp-1, a transmembrane protein resident in late endosomes and lamellar bodies. Brefeldin A induced a loss of colocalization between MG160 and NFlank, shifting NFlank immunostaining to a juxtanuclear tubular array. In pulse-chase studies, brefeldin A blocked all processing of 42-kDa pro-SP-B whereas similar studies using monensin blocked the final N-terminal processing event of 9 to 8 kDa SP-B. We conclude that: 1) the first enzymatic cleavage of pro-SP-B to the 25-kDa intermediate is in the brefeldin A-sensitive, medial Golgi; 2) cleavage of the 25-kDa intermediate to a 9-kDa form is a trans-Golgi event that is slowed but not blocked by monensin; 3) the final cleavage of 9 to 8 kDa SP-B is a monensin-sensitive, post-Golgi event occurring prior to transfer of SP-B to lamellar bodies.