Mutations in the surfactant protein C gene (SFTPC) were recently reported in patients with interstitial lung disease. In a 13-month-old infant with severe respiratory insufficiency, a lung biopsy elicited combined histological patterns of nonspecific interstitial pneumonia and pulmonary alveolar proteinosis. Immunohistochemical and biochemical analyses showed an intra-alveolar accumulation of surfactant protein (SP)-A, precursors of SP-B, mature SP-B, aberrantly processed proSP-C, as well as mono- and dimeric SP-C. Sequencing of genomic DNA detected a de novo heterozygous missense mutation of the SFTPC gene (g.1286T>C) resulting in a substitution of threonine for isoleucine (173T) in the C-terminal propeptide. At the ultrastructural level, abnormal transport vesicles were detected in type-II pneumocytes. Fusion proteins, consisting of enhanced green fluorescent protein and wild-type or mutant proSP-C, were used to evaluate protein trafficking in vitro. In contrast to wild-type proSP-C, mutant proSP-C was routed to early endosomes when transfected into A549 epithelial cells. In contrast to previously reported mutations, the 173T represents a new class of surfactant protein C gene mutations, which is marked by a distinct trafficking, processing, palmitoylation, and secretion of the mutant and wild-type surfactant protein C. This report heralds the emerging diversity of phenotypes associated with the expression of mutant surfactant C proteins.