In a model of pulmonary inflammation and fibrosis induced by the antineoplastic antibiotic, bleomycin, we previously demonstrated that TGF-beta was markedly elevated within 7 d of bleomycin administration. At the time of maximal TGF-beta production, TGF-beta 1 was localized by immunohistochemistry to be present almost exclusively in alveolar macrophages. In this study, we have demonstrated that alveolar macrophages stimulated by bleomycin-induced injury secrete large quantities of biologically active TGF-beta 1 when explanted into tissue culture. However, alveolar macrophages from normal saline-treated rats secrete small quantities of biologically inactive TGF-beta. In contrast, splenic macrophages secrete large quantities of inactive TGF-beta and are unaffected by the intratracheal bleomycin treatment. High doses of the corticosteroid methylprednisolone given intramuscularly before and concomitantly with bleomycin administration prevented the influx of alveolar macrophages into the lungs, diminishing both the number of macrophages present in the alveoli and the total lung content of TGF-beta. However, the rate of secretion of TGF-beta by alveolar macrophages recovered from the alveoli was unchanged after corticosteroid treatment. When activated alveolar macrophages were cultured in the presence of several concentrations of dexamethasone that completely suppressed IL-1 secretion, little effect on TGF-beta secretion was observed. The findings in this study demonstrate that during bleomycin-induced injury, alveolar macrophages not only secrete large quantities of active TGF-beta 1, but are a predominant source of the enhanced TGF-beta response seen in this model. Furthermore, the alveolar macrophage secretion of TGF-beta is not inhibited by the presence of high concentrations of corticosteroids.