Idiopathic pulmonary fibrosis is an inexorably fatal disorder characterized by connective tissue deposition within the terminal air spaces resulting in loss of lung function and eventual respiratory failure. Previously, we demonstrated that foci of activated fibroblasts expressing high levels of fibronectin, procollagen, and smooth muscle actin and thus resembling those found in healing wounds are responsible for the connective tissue deposition and scarring in idiopathic pulmonary fibrosis. Using in situ hybridization and immunohistochemistry, we now demonstrate the presence of transforming growth factor beta 1 (TGF-beta 1), a potent profibrotic cytokine, in the foci containing these activated fibroblasts. These results suggest that matrix-associated TGF-beta 1 may serve as a stimulus for the persistent expression of connective tissue genes. One potential source of the TGF-beta 1 is the alveolar macrophage, and we demonstrate the expression of abundant TGF-beta 1 mRNA in alveolar macrophages in lung tissue from patients with idiopathic pulmonary fibrosis.