Sodium transport via epithelial sodium channels (ENaC) expressed in alveolar epithelial cells (AEC) provides the driving force for removal of fluid from the alveolar space. The membrane-bound channel-activating protease 1 (CAP1/ Prss8) activates ENaC in vitro in various expression systems. To study the role of CAP1/ Prss8 in alveolar sodium transport and lung fluid balance in vivo, we generated mice lacking CAP1/ Prss8 in the alveolar epithelium using conditional Cre-loxP-mediated recombination. Deficiency of CAP1/ Prss8 in AEC induced in vitro a 40% decrease in ENaC-mediated sodium currents. Sodium-driven alveolar fluid clearance (AFC) was reduced in CAP1/ Prss8-deficient mice, due to a 48% decrease in amiloride-sensitive clearance, and was less sensitive to β 2-agonist treatment. Intra-alveolar treatment with neutrophil elastase, a soluble serine protease activating ENaC at the cell surface, fully restored basal AFC and the stimulation by β 2-agonists. Finally, acute volume-overload increased alveolar lining fluid volume in CAP1/ Prss8-deficient mice. This study reveals that CAP1 plays a crucial role in the regulation of ENaC-mediated alveolar sodium and water transport and in mouse lung fluid balance.