The enzyme PAM is required for activation of many peptide hormones. In adult mouse lung, immunostaining for PAM was located in Clara cells, which constitute most of the epithelial cells of the mouse bronchial/bronchiolar tree. Immunoreactivity appeared for the first time in the epithelium on gestational Day 16, being slight and mostly restricted to the apical cytoplasm. As the lung developed, the labeling became gradually stronger and extended throughout the cell. Smooth muscle of airways and blood vessels, and some parenchymal cells, probably macrophages, also showed PAM immunoreactivity. Of the two enzymatically active domains of PAM, only PHM and not PAL immunoreactivity was found at all stages studied. The early appearance of PAM in developing mouse lung, as well as its presence in a variety of tissues, probably indicates a complex role of this enzyme in pulmonary development and function.