Transforming growth factor (TGF)-β1 is an important regulator of inflammation and fibrosis. TGF-β1 is usually secreted as a biologically latent protein called latent TGF-β1 (L-TGF-β1). L-TGF-β1 has no biologic effect unless L-TGF-β1 is converted to its active form. Using a well-recognized model of lung injury induced by the antineoplastic antibiotic bleomycin (Blm), we demonstrated that 7 d after intratracheal Blm administration, total lung TGF-β was maximally increased. This induction was due to TGF-β1 production by alveolar macrophages that, when explanted, generated increased quantities of L-TGF-β1 complexed with the glycoprotein thrombospondin (TSP)-1. The TSP-1/L-TGF-β1 complex was associated with CD36, a receptor for TSP-1. The association of TSP-1/L-TGF-β1 to CD36 was critical for plasmin-mediated release of mature TGF-β1. In this paper we show that, compared with administration of Blm by itself, when a synthetic peptide of CD36 between amino acids 93 and 110 is given concomitantly with Blm to rats, alveolar macrophages generate markedly less active TGF-β1, the rats gain weight more rapidly, and there is less inflammation, collagen I and III, and fibronectin synthesis. These findings demonstrate a novel in vivo mechanism of activation of L-TGF-β1 in lung injury and the importance of alveolar macrophage-derived active TGF-β1 in the pathogenesis of pulmonary inflammation and fibrosis.