Communication between the airway epithelium and stroma is evident during embryogenesis, and both epithelial shedding and increased smooth muscle proliferation are features of airway remodeling. Hence, we hypothesized that after injury the airway epithelium could modulate airway smooth muscle proliferation. Fully differentiated primary normal human bronchial epithelial (NHBE) cells at an air-liquid interface were co-cultured with serum-deprived normal primary human airway smooth muscle cells (HASM) using commercially available Transwells. In some co-cultures, the NHBE were repeatedly (x4) scrape-injured. An in vivo model of tracheal injury consisted of gently denuding the tracheal epithelium (x3) of a rabbit over 5 days and then examining the trachea by histology 3 days after the last injury. Our results show that HASM cell number increases 2.5-fold in the presence of NHBE, and 4.3-fold in the presence of injured NHBE compared with HASM alone after 8 days of in vitro co-culture. In addition, IL-6, IL-8, monocyte chemotactic protein (MCP)-1 and, more markedly, matrix metalloproteinase (MMP)-9 concentration increased in co-culture correlating with enhanced HASM growth. Inhibiting MMP-9 release significantly attenuated the NHBE-dependent HASM proliferation in co-culture. In vivo, the injured rabbit trachea demonstrated proliferation in the smooth muscle (trachealis) region and significant MMP-9 staining, which was absent in the uninjured control. The airway epithelium modulates smooth muscle cell proliferation via a mechanism that involves secretion of soluble mediators including potential smooth muscle mitogens such as IL-6, IL-8, and MCP-1, but also through a novel MMP-9-dependent mechanism.