Interstitial lung disease (ILD) is a major cause of morbidity and mortality in scleroderma (systemic sclerosis, or SSc). Fibrocytes are a monocyte-derived cell population implicated in the pathogenesis of fibrosing disorders. Given the recently recognized importance of caveolin-1 in regulating function and signaling in SSc monocytes, in the present study we examined the role of caveolin-1 in the migration and/or trafficking and phenotype of monocytes and fibrocytes in fibrotic lung disease in human patients and an animal model. These studies fill a gap in our understanding of how monocytes and fibrocytes contribute to SSc-ILD pathology. We found that C-X-C chemokine receptor type 4-positive (CXCR4+)/collagen I-positive (ColI+), CD34+/ColI+ and CD45+/ColI+ cells are present in SSc-ILD lungs, but not in control lungs, with CXCR4+ cells being most prevalent. Expression of CXCR4 and its ligand, stromal cell-derived factor 1 (CXCL12), are also highly upregulated in SSc-ILD lung tissue. SSc monocytes, which lack caveolin-1 and therefore overexpress CXCR4, exhibit almost sevenfold increased migration toward CXCL12 compared to control monocytes. Restoration of caveolin-1 function by administering the caveolin scaffolding domain (CSD) peptide reverses this hypermigration. Similarly, transforming growth factor β-treated normal monocytes lose caveolin-1, overexpress CXCR4 and exhibit 15-fold increased monocyte migration that is CSD peptide-sensitive. SSc monocytes exhibit a different phenotype than normal monocytes, expressing high levels of ColI, CD14 and CD34. Because ColI+/CD14+ cells are prevalent in SSc blood, we looked for such cells in lung tissue and confirmed their presence in SSc-ILD lungs but not in normal lungs. Finally, in the bleomycin model of lung fibrosis, we show that CSD peptide diminishes fibrocyte accumulation in the lungs. Our results suggest that low caveolin-1 in SSc monocytes contributes to ILD via effects on cell migration and phenotype and that the hyperaccumulation of fibrocytes in SSc-ILD may result from the altered phenotype and migratory activity of their monocyte precursors.