A lysosomal phospholipase A2, LPLA2, was recently characterized and shown to have substrate specificity for phosphatidylcholine and phosphatidylethanolamine. LPLA2 is ubiquitously expressed but is most highly expressed in alveolar macrophages. Double conditional gene targeting was employed to elucidate the function of LPLA2. LPLA2-deficient mice (Lpla2^−/−) were generated by the systemic deletion of exon 5 of the Lpla2 gene, which encodes the lipase motif essential for the phospholipase A2 activity. The survival of the Lpla2^−/− mice was normal. Lpla2^−/− mouse mating pairs yielded normal litter sizes, indicating that the gene deficiency did not impair fertility or fecundity. Alveolar macrophages from wild-type but not Lpla2^−/− mice readily degraded radiolabeled phosphatidylcholine. A marked accumulation of phospholipids, in particular phosphatidylethanolamine and phosphatidylcholine, was found in the alveolar macrophages, the peritoneal macrophages, and the spleens of Lpla2^−/− mice. By 1 year of age, Lpla2^−/− mice demonstrated marked splenomegaly and increased lung surfactant phospholipid levels. Ultrastructural examination of Lpla2^−/− mouse alveolar and peritoneal macrophages revealed the appearance of foam cells with lamellar inclusion bodies, a hallmark of cellular phospholipidosis. Thus, a deficiency of lysosomal phospholipase A2 results in foam cell formation, surfactant lipid accumulation, splenomegaly, and phospholipidosis in mice.