TGF-beta has been implicated in scarring and tissue fibrosis. Most cells secrete TGF-beta as a high molecular weight, latent complex that must be processed to a lower molecular weight, biologically active form. A number of molecules are involved in this activation step including the mannose 6-phosphate/insulin-like growth factor-II receptor, tissue transglutaminase, thrombospondin, plasmin, and others. Here we describe a rapid macrophage-based system for TGF-beta1 activation, which could be used for screening potential anti-fibrotic agents. The system employs transformed mouse peritoneal macrophages treated with lipopolysaccharide as a cell line capable of activating latent TGF-beta. The activation mechanism in our system involves mannose 6-phosphate/insulin-like growth factor-II receptor and transglutaminase. The activation of latent TGF-beta in this system can be prevented by the addition of mannose-6-phosphate but not mannose-1-phosphate. In addition, transglutaminase inhibitors, antibodies to thrombospondin, insulin-like growth factor-II in the presence of its binding protein IGFBP-2, but not IGFBP-1, suppressed the activation of TGF-beta. Anti-inflammatory molecules, such as hydrocortisone, when added to LPS-treated macrophages, inhibited TGF-beta activation by a mechanism, that may involve downregulation of transglutaminase expression. In summary, this new, rapid and reproducible system allows testing molecules for their ability to inhibit TGF-beta activation, thus providing a screening method for potential anti-scarring molecules.