The E-cadherin receptor CD103 (alpha(E)beta(7)-integrin) is expressed on specific populations of pulmonary dendritic cells (DC) and T cells. However, CD103 function in the lung is not well understood. Matrilysin (MMP-7) expression is increased in lung injury and cleaves E-cadherin from injured lung epithelium. Thus, to assess matrilysin effects on CD103-E-cadherin interactions in lung injury, wild-type, CD103(-/-), and Mmp7(-/-) mice, in which E-cadherin isn't cleaved in the lung, were treated with bleomycin or bleomycin with nFMLP to reverse the defect in acute neutrophil influx seen in Mmp7(-/-) mice. Pulmonary CD103(+) DC were significantly increased in injured wild-type compared with Mmp7(-/-) mice, and CD103(+) leukocytes showed significantly enhanced interaction with E-cadherin on injured wild-type epithelium than with Mmp7(-/-) epithelium in vitro and in vivo. Bleomycin-treated CD103(-/-) mice had persistent neutrophilic inflammation, increased fibrosis, and increased mortality compared with wild-type mice, a phenotype that was partially recapitulated in bleomycin/nFMLP-treated Mmp7(-/-) mice. Soluble E-cadherin increased IL-12 and IL-10 and reduced IL-6 mRNA expression in wild-type bone marrow-derived DC but not in CD103(-/-) bone marrow-derived DC. Similar mRNA patterns were seen in lungs of bleomycin-injured wild-type, but not CD103(-/-) or Mmp7(-/-), mice. In conclusion, matrilysin regulates pulmonary localization of DC that express CD103, and E-cadherin cleavage may activate CD103(+) DC to limit inflammation and inhibit fibrosis.