Congenital surfactant associated protein B deficiency is now a recognized clinical and pathological entity. In order to better understand the pathogenesis of the pulmonary disorder, we have studied fetal FVBN mice which are homozygous for the deletion (-/-), heterozygous (+/-), or wild Type (+/+) at 15.5 days, 16.5 days and 17-17.5 days gestation, using transmission electron microscopy. This is the first report of an SP-B knockout in a genetic background other than Swiss black mice. SP-B +/- males were crossed with FVBN wild type females for 9 generations. At 15.5 days, the 3 genotypes were nearly identical in their phenotypes. Lipid membranes appeared near the epithelial basement membrane of pre-Type II cells in pools of monoparticulate glycogen(MG). These membranes were often surrounded by what appeared to be pools of neutral lipid or lipid droplets appeared nearby. Lipid droplets were also numerous in lipocytes beneath the basement membrane. Multivesicular bodies(MVBs) were numerous, often intimately associated with Golgi apparatus, and distant from the MG pools. At 16.5 days, the +/- and the +/+ animals showed similar changes with recognizable lamellar body lipid whorls on the edges or outside the MG pools. MVBs were often immediately adjacent to lamellae in the form of crescents or were incorporated as dense cores. By 17-17.5 days, fully developed lamellar bodies were present in Type II cells of +/+ and +/- animals and exocytosis was seen with lipid in airways. In contrast, the -/- animals at 16.5 days no longer had membranous strands of lipid, but lipid appeared as large dense particles within a membrane bound structure which also contained what appeared to be isolated membranes of MVBs. These large structures seemed to be coalescing in some cases and were outside the MG pools. By 17-17.5 days, the -/- structures appeared further developed as MVB membranes incorporated with dense lipid remnants into the abnormal lamellar bodies. We speculate that the lipid that forms normal lamellar bodies does not arise from MVB membranes, but from lipid transferred to Type II cells. MVBs arise from Golgi apparatus and are incorporated into developing lamellae, presumably supplying the surfactant associated proteins. SP-B deficient mice, however, cannot form proper lamellae as lipid strands, and MVB membranes which are incorporated with the lipid are fragmented and exocytosis does not appear to occur normally.