Human surfactant protein C (hSP-C) is synthesized by the alveolar type 2 cell as a 197 amino acid integral membrane proprotein and proteolytically processed to a secreted 3.7 kDa mature form. Although the SP-C null mouse possesses a non-lethal phenotype, a heterozygous substitution of A for G in the first base of intron 4 of the human SP-C gene (c.460+1A>G) has been reported in association with familial interstitial lung disease and absence of mature protein. This mutation produces a splice deletion of exon 4(ΔExon4) resulting in removal of a positionally conserved cysteine in the C-terminal flanking propeptide. Based on a prior study showing that an identical deletion in the rat isoform diverted mutant protein to stable aggregates, we hypothesized that expression of the ΔExon4 mutation would result in disruption of intracellular trafficking of both mutant and wild-type proSP-C. We tested this in vitro using fusion proteins of EGFP conjugated either to wild-type SP-C (EGFP/hSP-C^1-197) or to SP-C deleted of Exon4 (EGFP/hSP-C^ΔExon4). Fluorescence microscopy showed that EGFP/hSP-C^1-197 transfected into A549 cells was expressed in a punctuate pattern in CD63 (+) cytoplasmic vesicles, whereas EGFP/hSP-C^ΔExon4 accumulated in ubiquitinated perinuclear inclusions linked to the microtubule organizing center. A similar juxtanuclear pattern was observed following transfection of SP-C cDNA lacking only cysteine residues in the C-terminal propeptide encoded by Exon 4(EGFP/hSP-C^C120/121G). To evaluate whether mutant proSP-C could function as a dominant negative, EGFP/hSP-C^ΔExon4 was cotransfected with HA-tagged hSP-C^1-197 and resulted in the restriction of both forms to perinuclear compartments. Addition of Na⁺ 4-phenylbutyrate, a facilitator of trafficking of other misfolded proteins, attenuated the aggregation of EGFP/hSP-C^ΔExon4. We conclude that c.460+1A>G mutation of human SP-C results in disruption of disulfide-mediated folding encoded by Exon 4 leading to diversion of unprocessed proSP-C to aggresomes. The heterotypic oligomerization of hSP-C^1-197 and hSP-C^ΔExon4provides a molecular mechanism for the dominant-negative effect observed in vivo.