Patients with interstitial lung diseases, such as idiopathic pulmonary fibrosis (IPF) and bronchopulmonary dysplasia (BPD), suffer from lung fibrosis secondary to myofibroblast-mediated excessive ECM deposition and destruction of lung architecture. Transforming growth factor (TGF)-1 induces epithelial-mesenchymal transition (EMT) of alveolar epithelial cells (AEC) to myofibroblasts both in vitro and in vivo. Inhaled nitric oxide (NO) attenuates ECM accumulation, enhances lung growth and decreases alveolar myofibroblast number in experimental models. We therefore hypothesized that NO attenuates TGF-1-induced EMT in cultured AEC. Studies of the capacity for endogenous NO production in AEC revealed that endothelial NOS (eNOS) and inducible NOS (iNOS) are expressed and active in AEC. Total NOS activity was 1.3pmol/mg protein/min with 67% derived from eNOS. TGF-1 (50 pM) suppressed eNOS expression by over 60% and activity by 83%, but did not affect iNOS expression or activity. Inhibition of endogenous NOS with L-NAME led to spontaneous EMT, manifested by increased -SMA expression and a fibroblast-like morphology. Provision of exogenous NO to TGF-1 treated AEC decreased stress fiber-associated -SMA expression and decreased collagen I expression by 80%. NO-treated AEC also retained an epithelial morphology and exhibited increased lamellar protein, E-cadherin and pro-SpB expression compared to those treated with TGF-1 alone. These findings indicate that NO serves a critical role in preserving an epithelial phenotype and in attenuating EMT in AEC. NO-mediated regulation of AEC fate may have important implications in the pathophysiology and treatment of diseases such as IPF and BPD.