Alveolar type II (ATII) cells remain differentiated and express surfactant proteins when cultured at an air-liquid (A/L) interface. When cultured under submerged conditions, ATII cells dedifferentiate and change their gene expression profile. We have previously shown that gene expression under submerged conditions is regulated by hypoxia inducible factor (HIF) signaling due to focal hypoxia resulting from ATII cell metabolism. Herein, we sought to further define gene expression changes in ATII cells cultured under submerged conditions. We performed a genome wide microarray on RNA extracted from rat ATII cells cultured under submerged conditions for 24-48 h after switching from an A/L interface. We found significant alterations in gene expression, including upregulation of the HIF target genes stanniocalcin-1 (STC1), tyrosine hydroxylase (Th), enolase (Eno) 2, and matrix metalloproteinase (MMP) 13, and we verified upregulation of these genes by RT-PCR. Because STC1, a highly evolutionarily conserved glycoprotein with anti-inflammatory, anti-apoptotic, anti-oxidant, and wound healing properties, is widely expressed in the lung, we further explored the potential functions of STC1 in the alveolar epithelium. We found that STC1 was induced by hypoxia and HIF in rat ATII cells, and this induction occurred rapidly and reversibly. We also showed that recombinant human STC1 (rhSTC1) enhanced cell motility with extended lamellipodia formation in alveolar epithelial cell (AEC) monolayers but did not inhibit the oxidative damage induced by LPS. We also confirmed that STC1 was upregulated by hypoxia and HIF in human lung epithelial cells. In this study, we have found that several HIF target genes including STC1 are upregulated in AECs by a submerged condition, that STC1 is regulated by hypoxia and HIF, that this regulation is rapidly and reversibly, and that STC1 enhances wound healing moderately in AEC monolayers. However, STC1 did not inhibit oxidative damage in rat AECs stimulated by LPS in vitro. Therefore, alterations in gene expression by ATII cells under submerged conditions including STC1 were largely induced by hypoxia and HIF, which may be relevant to our understanding of the pathogenesis of various lung diseases in which the alveolar epithelium is exposed to relative hypoxia.