Rationale: Fibroblast Growth Factor (FGF10) controls survival, proliferation and differentiation of distal-alveolar epithelial progenitor cells during lung development. Objective: To test for the protective and regenerative effect of Fgf10 overexpression in a bleomycin-induced mouse model of pulmonary inflammation and fibrosis. Methods: In SP-C-rtTA; tet(O)Fgf10 double transgenic mice lung fibrosis was induced in two-month-old transgenic mice by subcutaneous delivery of bleomycin (BLM) using an osmotic mini-pump for one week. Exogenous Fgf10 expression in the alveolar epithelium was induced for seven days using doxycycline during the first, second and the third week after bleomycin pump implantation and lungs were examined at 28 days. Results: Fgf10 overexpression during week 1 (inflammatory phase) resulted in increased survival and attenuated lung fibrosis score and collagen deposition. In these Fgf10 overexpressing mice, an increase in regulatory T cells and a reduction in both TGFß1 and MMP2 activity was observed in bronchoalveolar lavage fluids whereas the number of SP-C positive, alveolar epithelial type II cells (AEC2) was markedly elevated. Analysis of SP-C and TUNEL double positive cells and isolation of AEC2 from lungs overexpressing Fgf10 demonstrated increased AEC2 survival. Expression of Fgf10 during week 2 and week 3 (fibrotic phase) showed significant attenuation of the lung fibrosis score and collagen deposition. Conclusions: In the bleomycin model of lung inflammation and fibrosis, Fgf10 overexpression both during the inflammatory and the fibrotic phase results in a greatly reduced extent of lung fibrosis suggesting that FGF10 may be useful as a novel approach to the treatment of pulmonary fibrosis.