With increasing worldwide rates of morbidity and mortality of pulmonary fibrosis, the development of effective therapeutics for this disease is of great interest. Secretoglobin (SCGB) 3A2, a novel cytokine-like molecule predominantly expressed in pulmonary airways epithelium, exhibits anti-inflammatory and growth factor activities. In the current study SCGB3A2 was found to inhibit TGFβ-induced differentiation of fibroblasts to myofibroblasts, a hallmark of the fibrogenic process, using pulmonary fibroblasts isolated from adult mice. This induction was through increased phosphorylation of STAT1 and expression of SMAD7 and decreased phosphorylation of SMAD2 and SMAD3. To demonstrate the effect of SCGB3A2 on the TGFβ signaling in vivo, a bleomycin-induced pulmonary fibrosis mouse model was used. Mice were administered bleomycin intratracheally followed by intravenous injection of recombinant SCGB3A2. Histological examination in conjunction with inflammatory cell counts in bronchoalveolar lavage fluids demonstrated that SCGB3A2 suppressed bleomycin-induced pulmonary fibrosis. Microarray analysis was carried out using RNAs from lungs of bleomycin-treated mice with or without SCGB3A2 and normal mice treated with SCGB3A2. The results demonstrated that SCGB3A2 affects TGFβ signaling and reduces the expression of genes involved in fibrosis. This study suggests the potential utility of SCGB3A2 for targeting TGFβ signaling in the treatment of pulmonary fibrosis.