Both human lung surfactant protein, SP-B, and its amino-terminal peptide, SP-B-1-25, inhibit the formation of condensed phases in monolayers of palmitic acid, resulting new fluid phase. This fluid phase forms a network, separating condensed-phase domains at coexistence. The network persists to high surface pressures, altering the nucleation, growth, and morphology of monolayer collapse structures, leading to lower surface tensions on compression and more reversible respreading on expansion. The network is stabilized by the low line tension between the fluid phase and the condensed phase as confirmed by the formation of "stripe" phases.