Rationale: Ineffective repair of a damaged alveolar epithelium has been postulated to be a cause of pulmonary fibrosis. In support of this theory, epithelial cell abnormalities including hyperplasia of type II cells, apoptosis, and persistent denudation of the alveolar basement membrane are found in the lungs of humans with idiopathic pulmonary fibrosis and in animal models of fibrotic lung disease. Furthermore, mutations in genes that affect regenerative capacity or that cause injury/apoptosis of type II alveolar epithelial cells have been identified in familial forms of pulmonary fibrosis. Although these findings are compelling, there are no studies that demonstrate a direct role for the alveolar epithelium or, more specifically, type II cells in the scarring process. Objectives: We sought to determine if a targeted injury to type II cells would result in pulmonary fibrosis. Methods: A transgenic mouse was generated to express the human diphtheria toxin receptor on type II alveolar epithelial cells. Diphtheria toxin was then administered to these animals in order to specifically target the type II epithelium for injury. Lung fibrosis was assessed both by histology and by hydroxyproline measurement. Measurements and Results: Transgenic mice treated with diphtheria toxin developed an approximate 2-fold increase in their lung hydroxyproline content on day 21 and day 28 after diphtheria toxin treatment. The fibrosis developed in conjunction with type II cell injury. Histological evaluation revealed diffuse collagen deposition with patchy areas of more confluent scarring and associated alveolar contraction. Conclusions: The development of lung fibrosis in the setting of type II cell injury in our model provides evidence for a causal link between the epithelial defects seen in IPF and the corresponding areas of scarring.