Alveolar cell carcinoma constitutes only 1 to 8% of all primary lung malignancies but it has occasioned considerable controversy about its histogenesis, morphology and prognostic implication. Authors experienced recently a case of alveolar cell carcinoma of the lung occurring in a 64-year-old male. He was admitted for the evaluation of coughing and expectoration of sputum for 3 months. X-ray film of chest showed diffuse radio-opacity of the left lower lobe of lung. Bronchoscopy was unrevealing. Exploratory thoracotomy and left lower lobectomy was performed to show diffuse consolidation involving entire left lower lobe of the lung. Grossly, cut surface exhibited diffusely yellow white or pale grayish firm lobar consolidation, which resembled lobar pneumonia in the stage of gray hepatization or lipoid pneumonia. Microscopically, proliferating columnar epithelia were supported by thin or slightly thickened alveolar septa, presenting an alveolar pattern of growth. Electron microscopically, the tumor cells lining the alveolar basement membrane had ultrastructural features resembling pneumonocyte type B. It was concluded that the tumor cells in this alveolar cell carcinoma were derived from pneumonocyte type B.