The esterases of rabbit lung have been investigated from two viewpoints, the cytochemical and the biochemical. To accomplish this objective, we designed and synthesized a series of ester substrates which provide both a cytochemical indicator of the location of the enzyme and a means of following the enzymatic activity in tissue homogenates and subfractions. The substrates are p -nitrophenylthiol esters which yield, upon hydrolysis, carboxylic acid and p -nitrothiophenol. The latter can react with aurous ions to give an electron-opaque deposit; in addition, the strong absorption of p -nitrothiophenol at 410 mµ permits continuous kinetic measurements. Thus, it is possible to correlate the intracellular site of action and the biochemical behavior of the esterases. The new substrates are the thiol analogues of the p -nitrophenyl esters frequently employed as esterase substrates. The rates of hydrolysis of the two series of esters are compared in vitro. During tissue fractionation, most of the esterase activity sediments with a particulate fraction. The effects of a number of common esterase inhibitors, such as diisopropyl phosphorofluoridate and eserine sulfate, are examined, and the effects of enzyme concentration and heat inactivation are shown with the use of the partially purified preparations. The cytochemical work shows that the esterase activity is most prominent in the lamellar bodies of the giant alveolar (type II, septal, or granular pneumatocyte) cells of the lung and to a lesser extent in squamous (type I, or membranous pneumatocyte) epithelial and endothelial cells. In both the cytochemical and biochemical studies, the enzymes are inhibited by diisopropyl phosphorofluoridate and phenyl methylsulfonyl fluoride but are insensitive to eserine sulfate.