Keratinocyte growth factor (KGF or FGF-7) stimulates alveolar type II cell proliferation, but little is known about the signaling pathways involved. We investigated the role of the ERK (p42/44 mitogen activated protein [MAP] kinase) and phosphatidylinositol 3-OH kinase (PI3 kinase) pathways on alveolar type II cell proliferation and differentiation. Rat type II cells were cultured on tissue culture plastic and Matrigel in the presence or absence of KGF and specific chemical inhibitors PD98059, LY294002, and rapamycin at various concentrations. Proliferation was measured by thymidine incorporation and DNA quantitation, and differentiation was measured by expression of surfactant protein A and alkaline phosphatase. We demonstrate that KGF activates distal effectors of the PI3 kinase pathway, PKB/Akt, and p70S6 kinase, as well as p42/44 MAP kinase proteins. Inhibition of these pathways with PD98059, LY294002, or rapamycin inhibited type II cell proliferation but had no significant effect on differentiation. KGF did not activate the c-Jun kinase or p38 MAP kinase pathways. We conclude that the p42/44 MAP kinase and PI3 kinase pathways are important in regulating alveolar type II cell proliferation in response to KGF.