Surfactant protein B (SP-B) proprotein contains 3 saposin-like protein (SAPLIP) domains: A SAPLIP domain corresponding to the mature SP-B peptide is essential for lung function and postnatal survival; the function of SAPLIP domains in the N-terminal (SP-BN) and C-terminal (SP-BC) regions of the proprotein are not known. In the current study, SP-BN was detected in the supernatant of mouse bronchoalveolar lavage fluid (BALF) and in non-ciliated bronchiolar cells, alveolar type II epithelial cells and alveolar macrophages. Recombinant SP-BN indirectly promoted uptake of bacteria by macrophage cell lines and directly killed bacteria at acidic pH, consistent with a lysosomal, antimicrobial function. Native SP-BN isolated from BALF also killed bacteria, but only at acidic pH; the bactericidal activity of BALF at acidic pH was completely blocked by SP-BN antibody. Transgenic mice overexpressing SP-BN and mature SP-B peptide had significantly decreased bacterial burden and increased survival following intranasal inoculation with bacteria. These findings support the hypothesis that SP-BN contributes to innate host defense of the lung by supplementing the non-oxidant antimicrobial defenses of alveolar macrophages.