Type I alveolar cells
Type I alveolar cells are squamous (giving more surface area to each cell) and cover approximately 90–95% of the alveolar surface. Type I cells are involved in the process of gas exchange between the alveoli and blood. These cells are extremely thin (sometimes only 25 nm) – the electron microscope was needed to prove that all alveoli are covered with an epithelial lining. These cells need to be so thin to be readily permeable for enabling an easy gas exchange between the alveoli and the blood.
Organelles of type I alveolar cells such as the endoplasmic reticulum, Golgi apparatus and mitochondria are clustered around the nucleus leaving large areas of free cytoplasm. This reduces the thickness of the cell, thereby reducing the thickness of the blood-air barrier. The cytoplasm in the thin portion contains pinocytotic vesicles which may play a role in the removal of small particulate contaminants from the outer surface. In addition to desmosomes, all type I alveolar cells have occluding junctions that prevent the leakage of tissue fluid into the alveolar air space.
Type II alveolar cells
Type II alveolar cells cover a small fraction of the alveolar surface area. Their function is of major importance in the secretion of pulmonary surfactant, which decreases the surface tension within the alveoli. They are also capable of cellular division, giving rise to more type I alveolar cells when the lung tissue is damaged. These cells are granular and roughly cuboidal. Type II alveolar cells are typically found at the blood-air barrier. Although they only comprise <5% of the alveolar surface, they are relatively numerous (60% of alveolar epithelial cells). 
Type II cells start to develop at about 24 weeks of gestation, secreting small amounts of surfactant. However, adequate amounts of surfactant are not secreted until about 35 weeks of gestation - this is the main reason for increased rates of infant respiratory distress syndrome, which drastically reduces at ages above 35 weeks gestation.
Type II cells are responsible for the production and secretion of pulmonary surfactant (the majority of which are dipalmitoylphosphatidylcholine), a group of phospholipids that reduce the alveolar surface tension. Surfactant phospholipids are stored in type II alveolar cells in lamellar bodies, which are specialized vesicles. Release of surfactant in lamellar bodies occurs from an infant's first breath onwards.
Type II pneumocytes can replicate in the alveoli and will replicate to replace damaged type I cells.
- "Histology, A Text and Atlas, Sixth Edition," 2011, by Ross, Michael H, and Pawlina, Wojciech
- Fehrenbach H. 2001. "Alveolar epithelial type II cell: defender of the alveolus revisited." Respir Res.2(1):33-46.
- Jarrard JA, Linnoila RI, Lee H, Steinberg SM, Witschi H, Szabo E (December 1998). "MUC1 is a novel marker for the type II pneumocyte lineage during lung carcinogenesis". Cancer Res. 58 (23): 5582–9. PMID 9850098.
- Histology at KUMC resp-resp17
- Histology image: 13905loa – Histology Learning System at Boston University
- Electron micrograph at luc.edu