Myofibroblasts, the hallmark of fibrotic disease, contribute to the pathology of fibrosis by secreting large amounts of extracellular matrix and contributing to alveolar contraction. Myofibroblasts are characterized by the expression of alpha-smooth muscle actin (alpha-SMA), a contractile protein normally associated with smooth muscle cells. Transforming growth factor-beta1 (TGF-beta1) is a well characterized profibrotic cytokine that induces myofibroblast transformation both in vitro and in vivo. We report here that the lipid mediator prostaglandin E2 (PGE2) inhibits TGF-beta1-induced expression of alpha-SMA in primary fetal and adult lung fibroblasts. This inhibition of alpha-SMA expression is associated with a reduction in the expression of collagen I. Inhibitory actions of PGE2 are mediated via E prostanoid receptor 2 (EP2) signaling, but not by EP3 signaling, and increases in cyclic adenosine monophosphate production. The inhibitory effects of PGE2 on TGF-beta1-induced alpha-SMA expression are mimicked by an EP2 selective agonist, butaprost, and by forskolin-induced direct activation of adenyl cyclase. An EP2 antagonist blocks the inhibitory effects of PGE2, and an EP3 agonist does not inhibit TGF-beta1-mediated increases in alpha-SMA expression. Our results demonstrate that PGE2 inhibits transition of fibroblasts to myofibroblasts by an EP2 receptor-activated pathway. Augmenting this pathway may serve as a potent antifibrotic therapeutic strategy.