Pulmonary biopsy specimens from ten cases of idiopathic pulmonary fibrosis (IPF) were examined using routine histological stains, including toluidine blue, and immunohistochemistry by means of specific antibodies against alpha-smooth muscle (alpha-SM) actin, desmin, keratin, TGF beta 1, and TNF alpha. The sections were compared with two cases of normal lung. As shown previously, normal alveolar interstitium did not contain alpha-SM actin positive myofibroblasts nor did the alveolar lining contain any significant number of TGF beta 1 or TNF alpha laden epithelial cells. In IPF, during the inflammatory stage, the alveolar myofibroblasts expressed alpha-SM actin and the regenerating type II alveolar epithelium staining strongly with TGF beta 1 and TNF alpha antibodies. The former cytokine was also detected in the interstitial matrix and fibroblastic cells as well as in the wall of vessels. At this stage, a manifest mast cell infiltration was noted. In very fibrotic and cystic alveolar tissue, i.e., at end stage fibrosis, the number of alpha-SM actin positive myofibroblasts as well as that of TNF alpha laden type II epithelial cells diminished, while TGF beta 1 positive cells persisted. Our findings demonstrate that during IPF alveolar type II epithelium constitutes, if not the site of synthesis, at least the main reservoir for TGF beta 1 and TNF alpha. These cytokines, besides their involvement in fibrogenesis, play probably an important role in the expression of alpha-SM actin by alveolar myofibroblasts. Our study suggests the possibility of an interaction between interstitial cells and alveolar epithelium, during IPF.