Carcinoembryonic antigen (CEA), though typically associated with malignant epithelial neoplasms, is known to be present at elevated levels even in the serum of normal individuals and of patients suffering from interstitial diseases of the lung. Few reports have addressed the question of the possible source of CEA immunoreactivity within the lung parenchyma. Two patients with elevated CEA serum levels were studied by immunohistochemistry on open lung biopsy specimens. Two different antibodies (one absorbed with non-specific cross-reacting antigen, NCA) were used. The results show that bronchiolar cells and type II pneumocytes are focally positive with both antibodies; the immunoreaction is preserved even after absorption with NCA. In agreement with experimental data on CEA synthesis in fetal bronchial cell lines, these findings indicate that interstitial lung disorders may induce abnormal CEA-like substance expression. In these cases, where no epithelial neoplasms subsequently develop, the cutoff level for CEA in serum should be raised. Bronchiolar and alveolar cells appear primarily responsible for CEA-like substance production.