Although the receptor for advanced glycation end products (RAGE) has been used as a biological marker of alveolar epithelial cell injury in clinical studies, the mechanism for release of soluble RAGE from lung epithelial cells has not been well studied. Therefore, these studies were designed to determine the mechanism for release of soluble RAGE after lipopolysaccharide (LPS) challenge. For these purposes, alveolar epithelial cells from rat lungs were cultured on Transwell inserts, and LPS was added to the apical side (500 μg/ml) for 16 h on day 7. On day 7, RAGE was expressed predominantly in surfactant protein D-negative cells, and LPS challenge induced release of RAGE into the medium. This response was partially blocked by matrix metalloproteinase (MMP) inhibitors. Transcripts of MMP-3 and MMP-13 were upregulated by LPS, whereas RAGE transcripts did not change. Proteolysis by MMP-3 and MMP-13 resulted in soluble RAGE expression in the bronchoalveolar lavage fluid in the in situ rat lung, and this reaction was inhibited by MMP inhibitors. In human studies, both MMP-3 and -13 antigen levels were significantly correlated with the level of RAGE in pulmonary edema fluid samples. These results support the conclusion that release of RAGE is primarily mediated by proteolytic damage in alveolar epithelial cells in the lung, caused by proteases in acute inflammatory conditions in the distal air spaces.