Alveolar type II (ATII) cell proliferation and differentiation are important mechanisms in repair following injury to the alveolar epithelium. KGF is a potent ATII cell mitogen, which has been demonstrated to be protective in a number of animal models of lung injury. We have assessed the effect of recombinant human KGF (rhKGF) and liposome-mediated KGF gene delivery in vivo and evaluated the potential of KGF as a therapy for acute lung injury in mice. rhKGF was administered intratracheally in male BALB/c mice to assess dose response and time course of proliferation. SP-B immunohistochemistry demonstrated significant increases in ATII cell numbers at all rhKGF doses compared with control animals and peaked 2 days following administration of 10 mg/kg rhKGF. Protein therapy in general is very expensive, and gene therapy has been suggested as a cheaper alternative for many protein replacement therapies. We evaluated the effect of topical and systemic liposome-mediated KGF-gene delivery on ATII cell proliferation. SP-B immunohistochemistry showed only modest increases in ATII cell numbers following gene delivery, and these approaches were therefore not believed to be capable of reaching therapeutic levels. The effect of rhKGF was evaluated in a murine model of OA-induced lung injury. This model was found to be associated with significant alveolar damage leading to severe impairment of gas exchange and lung compliance. Pretreatment with rhKGF 2 days before intravenous OA challenge resulted in significant improvements in Po₂, Pco₂, and lung compliance. This study suggests the feasibility of KGF as a therapy for acute lung injury.