Intratracheal instillation of Tween causes a heterogeneous surfactant deactivation in the lung, with areas of unstable alveoli directly adjacent to normal stable alveoli. We employed in vivo video microscopy to directly assess alveolar stability in normal and surfactant-deactivated lung and tested our hypothesis that alveolar instability causes a mechanical injury, initiating an inflammatory response that results in a secondary neutrophil-mediated proteolytic injury. Pigs were mechanically ventilated (VT 10 cc/kg, positive end-expiratory pressure [PEEP] 3 cm H2O), randomized to into three groups, and followed for 4 hours: Control group (n = 3) surgery only; Tween group (n = 4) subjected to intratracheal Tween (surfactant deactivator causing alveolar instability); and Tween + PEEP group (n = 4) subjected to Tween with increased PEEP (15 cm H2O) to stabilize alveoli. The magnitude of alveolar instability was quantified by computer image analysis. Surfactant-deactivated lungs developed significant histopathology only in lung areas with unstable alveoli without an increase in neutrophil-derived proteases. PEEP stabilized alveoli and significantly reduced histologic evidence of lung injury. Thus, in this model, alveolar instability can independently cause ventilator-induced lung injury. To our knowledge, this is the first study to directly confirm that unstable alveoli are subjected to ventilator-induced lung injury whereas stable alveoli are not.