Patients with acute lung injury develop hypoxia, which may lead to lung dysfunction and aberrant tissue repair. Recent studies suggest that epithelial-mesenchymal transition (EMT) contributes to pulmonary fibrosis. We sought to determine whether hypoxia induces EMT in alveolar epithelial cells (AEC). We found that hypoxia induced the expression of smooth muscle actin (-SMA) and vimentin and decreased the expression of E-cadherin in transformed and primary human, rat and mouse AEC,suggesting that hypoxia induces EMT in AEC. Both severe and moderate hypoxia induce EMT. The reactive oxygen species (ROS) scavenger Euk-134 prevented hypoxia-induced EMT. Moreover, hypoxia-induced expression of -SMA and vimentin was prevented in mitochondria-deficient ⁰ cells, which are incapable of ROS production during hypoxia. CoCl2 and DMOG, two compounds that stabilize HIF- under normoxia, failed to induce -SMA expression in AEC. Furthermore, overexpression of constitutively active HIF-1 did not induce -SMA. However, loss of HIF-1 or HIF-2 abolished induction of -SMA mRNA during hypoxia. Hypoxia increased the levels of transforming growth factor-1 (TGF-1) and pre-incubation of AEC with SB431542, an inhibitor of the TGF-1 type I receptor kinase, prevented the hypoxia-induced EMT, suggesting that the process was TGF-1 dependent. Furthermore, both ROS and HIF- were necessary for hypoxia-induced TGF-1 upregulation. Accordingly, we provide evidence that hypoxia induces EMT of AEC through mitochondrial ROS, HIF and endogenous TGF-1 signaling.