Stretch is an essential mechanism for lung growth and development. Animal models in which fetal lungs have been chronically over or underdistended demonstrate a disrupted mix of type II and type I cells, with static overdistention typically promoting a type I cell phenotype. The Rho GTPase family, key regulators of cytoskeletal signaling, are known to mediate cellular differentiation in response to stretch in other organs. Using a well-described model of alveolar epithelial cell differentiation and a validated stretch device, we investigated the effects of supraphysiologic stretch on human fetal lung alveolar epithelial cell phenotype. Static stretch applied to epithelial cells suppressed type II cell markers (SP-B and Pepsinogen C, PGC), and induced type I cell markers (Caveolin-1, Claudin 7 and Plasminogen Activator Inhibitor-1, PAI-1) as predicted. Static stretch was also associated with Rho A activation. Furthermore, the Rho kinase inhibitor Y27632 decreased Rho A activation and blunted the stretch-induced changes in alveolar epithelial cell marker expression. Together these data provide further evidence that mechanical stimulation of the cytoskeleton and Rho activation are key upstream events in mechanotransduction-associated alveolar epithelial cell differentiation.