Annexin A2 (p36) is usually present together with its natural ligand p11 as a heterotetramer complex, which has multiple biological functions depending on its cellular localization. However, the detailed mechanism of annexin A2 translocation and its physiological role in inflammation remain unclear. Here, we show that IFN‐γ stimulation enhances surface translocation of annexin A2 on lung epithelial cells. While total annexin A2 protein remains unchanged, the expression of p11 is upregulated via the IFN‐γ‐activated JAK2/STAT1 signal pathway. Notably, IFN‐γ‐induced p11 expression is required for annexin A2 translocation to the cell surface. Since annexin A2 lacks a signal peptide for surface translocation by the classical endoplasmic reticulum‐Golgi route, its mode of trafficking remains unclear. We observed that p11‐dependent surface translocation of annexin A2 is associated with the exosomal secretion pathway. The IFN‐γ‐induced increase of annexin A2 in the exosomes is blocked in p11‐silenced cells. Furthermore, IFN‐γ‐induced surface expression of annexin A2 mediates phagocytosis of apoptotic cells by lung epithelial cells. These findings provide insights into the surface translocation mechanism of annexin A2 and illustrate a pivotal function of surface annexin A2 in the phagocytic response to IFN‐γ. J. Cell. Physiol. 227: 2775–2787, 2012. © 2011 Wiley Periodicals, Inc.