Expression of surfactant protein C (SP-C), which is restricted to alveolar type II epithelial cells of the adult lung is critically dependent on thyroid transcription factor 1 (TTF-1). In the present study we have demonstrated that Erm, a member of the Ets family of transcription factors, is expressed in the distal lung epithelium during development, and is also restricted to alveolar type II cells in the adult. Erm was upregulated by FGFs in culture, and blocking FGF signaling inhibited Erm expression both in vivo and in vitro. The SP-C minimal promoter was found to contain two potential Ets binding sites, and electrophoretic mobility shift assays (EMSA) showed that two 20-bp wild-type oligonucleotides containing the 5'-GGAA/T-3' Ets consensus binding motif were shifted by nuclear extracts from MLE15 cells. Co-transfection assays showed that Erm by itself had little effect on SP-C promoter activity, but that Erm significantly enhanced TTF-1-mediated SP-C transcription. Mutation of one of the Ets binding sites reduced SP-C transcription to background levels, whereas mutation of the other site resulted in increased SP-C transcription. Protein-protein interactions between Erm and TTF-1 were demonstrated by mammalian two-hybrid assays and by co-immunoprecipitation assays. Mapping studies showed that the Ets domain of Erm and the combined N-terminus and homeodomain of TTF-1 were critical for this interaction. Treatment of primary cultures of adult alveolar type II cells with siRNA targeting Erm diminished expression of both Erm and SP-C, but had no effect on b-actin or GAPDH. Taken together, these results demonstrate that Erm is involved in SP-C regulation, which results from an interaction with TTF-1.