Alveolar type II (ATII) cell apoptosis and depressed fibrinolysis that promotes alveolar fibrin deposition are associated with acute lung injury (ALI) and the development of pulmonary fibrosis (PF). We therefore sought to determine whether p53-mediated inhibition of urokinase-type plasminogen activator (uPA) and induction of plasminogen activator inhibitor-1 (PAI-1) contribute to ATII cell apoptosis that precedes the development of PF. We also sought to determine whether caveolin-1 scaffolding domain peptide (CSP) reverses these changes to protect against ALI and PF. Tissues as well as isolated ATII cells from the lungs of wild-type (WT) mice with BLM injury show increased apoptosis, p53, and PAI-1, and reciprocal suppression of uPA and uPA receptor (uPAR) protein expression. Treatment of WT mice with CSP reverses these effects and protects ATII cells against bleomycin (BLM)-induced apoptosis whereas CSP fails to attenuate ATII cell apoptosis or decrease p53 or PAI-1 in uPA-deficient mice. These mice demonstrate more severe PF. Thus p53 is increased and inhibits expression of uPA and uPAR while increasing PAI-1, changes that promote ATII cell apoptosis in mice with BLM-induced ALI. We show that CSP, an intervention targeting this pathway, protects the lung epithelium from apoptosis and prevents PF in BLM-induced lung injury via uPA-mediated inhibition of p53 and PAI-1.