Transforming growth factor beta s (TGF-beta s) are 25-kD multifunctional proteins that regulate inflammation and connective tissue synthesis. With rare exception TGF-beta 1 is secreted noncovalently bound to a latency-associated peptide (LAP) that renders the mature TGF-beta 1 biologically inactive. An important mechanism for the control of TGF-beta 1 action is the regulation of the post-translational processing that removes the LAP from the mature peptide and renders it biologically active. In a model of pulmonary inflammation and fibrosis induced by the antineoplastic antibiotic, bleomycin, we have demonstrated that explanted alveolar macrophages secrete progressively increasing quantities of a biologically active form of TGF-beta 1, the secretion of which was maximal 7 days after bleomycin administration. Thereafter, there was a rapid decline in the secretion of the active form of TGF-beta 1, whereas the latent form continued to be secreted in elevated quantities. Plasmin, a serine protease, was transiently generated by the same bleomycin-activated alveolar macrophages and paralleled the rise in active TGF-beta 1. When alpha 2-antiplasmin, an inhibitor of plasmin, was added to cultures of alveolar macrophages, the post-translational activation of L-TGF-beta 1, was totally abrogated. When plasmin was added to alveolar macrophages in culture, there was complete activation of the L-TGF-beta 1 that had been secreted during the culture period. However, there was no effect of plasmin on the same alveolar macrophage-derived L-TGF-beta 1 in cell-free conditioned media. Our findings suggest that the secretion of an active form of TGF-beta 1 by alveolar macrophages is regulated by the generation of plasmin and requires that the alveolar macrophages be present. Because the diminution of active TGF-beta 1 coincides with the resolution of inflammation, this suggests that the availability of plasmin regulates the biologically active form of TGF-beta 1, and thus, the inflammation seen after bleomycin-induced lung injury.