Pigment epithelium-derived factor (PEDF) is a 50-kD protein with angiostatic and neurotrophic activities that regulates vascular development within the eye. PEDF expression was increased in the lungs of patients with idiopathic pulmonary fibrosis (IPF) based on microarray analyses. Angiogenesis has been implicated in the pathogenesis of fibrotic lung diseases, we therefore hypothesized that regional abnormalities in vascularization occur in IPF as a result of an imbalance between PEDF and vascular endothelial growth factor. We demonstrated that vascular density is regionally decreased in IPF within the fibroblastic foci, and that within these areas PEDF was increased, whereas vascular endothelial growth factor was decreased. PEDF colocalized with the fibrogenic cytokine, transforming growth factor (TGF)-beta 1, particularly within the fibrotic interstitium and the fibroblastic focus, and prominently within the epithelium directly overlying the fibroblastic focus. This suggested that TGF-beta 1 might regulate PEDF expression. Using 3T3-L1 fibroblasts and human lung fibroblasts, we showed that PEDF was indeed a TGF-beta 1 target gene. Collectively, our findings implicate PEDF as a regulator of pulmonary angiogenesis and an important mediator in IPF.