The role of vitamin D in innate immunity is increasingly recognized. Recent work has identified a number of tissues that express the enzyme 1α-hydroxylase and are able to activate vitamin D. This locally produced vitamin D is believed to have important immunomodulatory effects. In this paper, we show that primary lung epithelial cells express high baseline levels of activating 1α-hydroxylase and low levels of inactivating 24-hydroxylase. The result of this enzyme expression is that airway epithelial cells constitutively convert inactive 25-dihydroxyvitamin D3 to the active 1,25-dihydroxyvitamin D3. Active vitamin D that is generated by lung epithelium leads to increased expression of vitamin D-regulated genes with important innate immune functions. These include the cathelicidin antimicrobial peptide gene and the TLR coreceptor CD14. dsRNA increases the expression of 1α-hydroxylase, augments the production of active vitamin D, and synergizes with vitamin D to increase expression of cathelicidin. In contrast to induction of the antimicrobial peptide, vitamin D attenuates dsRNA-induced expression of the NF-κB-driven gene IL-8. We conclude that primary epithelial cells generate active vitamin D, which then influences the expression of vitamin D-driven genes that play a major role in host defense. Furthermore, the presence of vitamin D alters induction of antimicrobial peptides and inflammatory cytokines in response to viruses. These observations suggest a novel mechanism by which local conversion of inactive to active vitamin D alters immune function in the lung.