Acute lung injury (ALI) is a devastating syndrome characterized by diffuse alveolar damage, elevated airspace levels of pro-inflammatory cytokines, and flooding of the alveolar spaces with protein-rich edema fluid. Interleukin-1beta (IL-1beta) is one of the most biologically active cytokines in the distal airspaces of patients with ALI. IL-1beta has been shown to increase lung epithelial and endothelial permeability. In this study, we hypothesized that IL-1beta would decrease vectorial ion and water transport across the distal lung epithelium. Therefore, we measured the effects of IL-1beta on transepithelial current, resistance, and sodium transport in primary cultures of alveolar epithelial type II (ATII) cells. IL-1beta significantly reduced the amiloride-sensitive fraction of the transepithelial current and sodium transport across rat ATII cell monolayers. Moreover, IL-1beta decreased basal and dexamethasone-induced epithelial sodium channel alpha-subunit (alpha ENaC) mRNA levels and total and cell-surface protein expression. The inhibitory effect of IL-1beta on alpha ENaC expression was mediated by the activation of p38 MAPK in both rat and human ATII cells and was independent of the activation of alpha v beta6 integrin and transforming growth factor-beta. These results indicate that IL-1beta may contribute to alveolar edema in ALI by reducing distal lung epithelial sodium absorption. This reduction in ion and water transport across the lung epithelium is in large part due to a decrease in alpha ENaC expression through p38 MAPK-dependent inhibition of alpha ENaC promoter activity and to an alteration in ENaC trafficking to the apical membrane of ATII cells.