Increased production of EGF or TGF-alpha by the respiratory epithelial cells has been associated with the pathogenesis of various forms of lung injury. Growth factors and cytokines are thought to act locally, via paracrine and autocrine mechanisms, to stimulate cell proliferation and matrix deposition by interstitial lung cells resulting in pulmonary fibrosis. To test whether TGF-alpha mediates pulmonary fibrotic responses, we have generated transgenic mice expressing human TGF-alpha under control of regulatory regions of the human surfactant protein C (SP-C) gene. Human TGF-alpha mRNA was expressed in pulmonary epithelial cells in the lungs of the transgenic mice. Adult mice bearing the SP-C-TGF-alpha transgene developed severe pulmonary fibrosis. Fibrotic lesions were observed in peribronchial, peribronchiolar, and perivascular regions, as well as subjacent to pleural surfaces. Lesions consisted of fibrous tissue that included groups of epithelial cells expressing endogenous SP-C mRNA, consistent with their identification as distal respiratory epithelial cells. Peripheral fibrotic regions consisted of thickened pleura associated with extensive collagen deposition. Alveolar architecture was disrupted in the transgenic mice with loss of alveoli in the lung parenchyma. Pulmonary epithelial cell expression of TGF-alpha in transgenic mice disrupts alveolar morphogenesis and produces fibrotic lesions mediated by paracrine signaling between respiratory epithelial and interstitial cells of the lung.