Myofibroblasts, the hallmark of fibrotic disease, contribute to the pathology of fibrosis by secreting large amounts of extracellular matrix and contributing to alveolar contraction. Myofibroblasts are characterized by the expression of α-smooth muscle actin (α-SMA), a contractile protein normally associated with smooth muscle cells. Transforming growth factor-β1 (TGF-β1) is a well characterized profibrotic cytokine that induces myofibroblast transformation both in vitro and in vivo. We report here that the lipid mediator prostaglandin E2 (PGE2) inhibits TGF-β1-induced expression of α-SMA in primary fetal and adult lung fibroblasts. This inhibition of α-SMA expression is associated with a reduction in the expression of collagen I. Inhibitory actions of PGE 2 are mediated via E prostanoid receptor 2 (EP2) signaling, but not by EP3 signaling, and increases in cyclic adenosine monophosphate production. The inhibitory effects of PGE2 on TGF-β1-induced α-SMA expression are mimicked by an EP2 selective agonist, butaprost, and by forskolin-induced direct activation of adenyl cyclase. An EP2 antagonist blocks the inhibitory effects of PGE2, and an EP3 agonist does not inhibit TGF-β1-mediated increases in α-SMA expression. Our results demonstrate that PGE2 inhibits transition of fibroblasts to myofibroblasts by an EP2 receptor-activated pathway. Augmenting this pathway may serve as a potent antifibrotic therapeutic strategy.