Surfactant protein B (SP-B) is a critical component of pulmonary surfactant, and a deficiency of active SP-B results in fatal respiratory failure. SP-B is synthesized by type-II pneumocytes as a 42-kDa propeptide (proSP-B), which is posttranslationally processed to an 8-kDa surface-active protein. Napsin A is an aspartic protease expressed in type-II pneumocytes. To characterize the role of napsin A in the processing of proSP-B, we colocalized napsin A and precursors of SP-B as well as SP-B in the Golgi complex, multivesicular, composite, and lamellar bodies of type-II pneumocytes in human lungs using immunogold labeling. Furthermore, we measured aspartic protease activity in isolated lamellar bodies as well as isolated human type-II pneumocytes and studied the cleavage of proSP-B by napsin A and isolated lamellar bodies in vitro. Both, napsin A and isolated lamellar bodies cleaved proSP-B and generated three identical processing products. Processing of proSP-B by isolated lamellar bodies was completely inhibited by an aspartic protease inhibitor. Sequence analysis of proSP-B processing products revealed several cleavage sites in the N- and C-terminal propeptides as well as one in the mature peptide. Two of the four processing products generated in vitro were also detected in type-II pneumocytes. In conclusion, our results show that napsin A is involved in the N- and C-terminal processing of proSP-B in type-II pneumocytes.