Ig-Hepta/GPR116 is a member of the G protein-coupled receptor family predominantly expressed in the alveolar type II epithelial cells of the lung. Previous studies have shown that Ig-Hepta is essential for lung surfactant homeostasis, and loss of its function results in high accumulation of surfactant lipids and proteins in the alveolar space. Ig-Hepta knock-out (Ig-Hepta(-/-)) mice also exhibit emphysema-like symptoms, including accumulation of foamy alveolar macrophages (AMs), but its pathogenic mechanism is unknown. Here, we show that the bronchoalveolar lavage fluid obtained from Ig-Hepta(-/-) mice contains high levels of inflammatory mediators, lipid hydroperoxides, and matrix metalloproteinases (MMPs), which are produced by AMs. Accumulation of reactive oxygen species was observed in the AMs of Ig-Hepta(-/-) mice in an age-dependent manner. In addition, nuclear factor-κB (NF-κB) is activated and translocated into the nuclei of the AMs of Ig-Hepta(-/-) mice. Release of MMP-2 and MMP-9 from the AMs was strongly inhibited by treatment with inhibitors of oxidants and NF-κB. We also found that the level of monocyte chemotactic protein-1 is increased in the embryonic lungs of Ig-Hepta(-/-) mice at 18.5 days postcoitum, when AMs are not accumulated and activated. These results suggest that Ig-Hepta plays an important role in regulating macrophage immune responses, and its deficiency leads to local inflammation in the lung, where AMs produce excessive amounts of reactive oxygen species and up-regulate MMPs through the NF-κB signaling pathway.