Recent evidence suggests that dysfunctional type II alveolar epithelial cells (AECs) contribute to the pathogenesis of idiopathic pulmonary fibrosis (IPF). Based on the hypothesis that disease-causing mutations in surfactant protein C (SFTPC) provide an important paradigm for studying IPF, we investigated a potential mechanism of AEC dysfunction suggested to result from mutant SFTPC expression: induction of endoplasmic reticulum (ER) stress and the unfolded protein response (UPR). We evaluated biopsies from 23 IPF patients (including 3 family members with L188Q SFTPC mutations, 10 individuals with familial interstitial pneumonia without SFTPC mutations, and 10 individuals with sporadic IPF) and sections from 10 control lungs. After demonstrating UPR activation in cultured A549 cells expressing mutant SFTPC, we identified prominent expression of UPR markers in AECs in the lungs of patients with SFTPC mutation-associated fibrosis. In individuals with familial interstitial pneumonia without SFTPC mutations and patients with sporadic IPF, we also found UPR activation selectively in AECs lining areas of fibrotic remodeling. Because herpesviruses are found frequently in IPF lungs and can induce ER stress, we investigated expression of viral proteins in lung biopsies. Herpesvirus protein expression was found in AECs from 15/23 IPF patients and colocalized with UPR markers in AECs from these patients. ER stress and UPR activation are found in the alveolar epithelium in patients with IPF and could contribute to disease progression. Activation of these pathways may result from altered surfactant protein processing or chronic herpesvirus infection.