Multiple studies have examined the direct cellular toxicity of silver nanoparticles (AgNPs). However, the lung is a complex biological system with multiple cell types and a lipid-rich surface fluid; therefore, organ level responses may not depend on direct cellular toxicity. We hypothesized that interaction with the lung lining is a critical determinant of organ level responses. Here, we have examined the effects of low dose intratracheal instillation of AgNPs (0.05 μg/g body weight) 20 and 110 nm diameter in size, and functionalized with citrate or polyvinylpyrrolidone. Both size and functionalization were significant factors in particle aggregation and lipid interaction in vitro. One day post-intratracheal instillation lung function was assessed, and bronchoalveolar lavage (BAL) and lung tissue collected. There were no signs of overt inflammation. There was no change in surfactant protein-B content in the BAL but there was loss of surfactant protein-D with polyvinylpyrrolidone (PVP)-stabilized particles. Mechanical impedance data demonstrated a significant increase in pulmonary elastance as compared to control, greatest with 110 nm PVP-stabilized particles. Seven days post-instillation of PVP-stabilized particles increased BAL cell counts, and reduced lung function was observed. These changes resolved by 21 days. Hence, AgNP-mediated alterations in the lung lining and mechanical function resolve by 21 days. Larger particles and PVP stabilization produce the largest disruptions. These studies demonstrate that low dose AgNPs elicit deficits in both mechanical and innate immune defense function, suggesting that organ level toxicity should be considered.