Idiopathic Pulmonary Fibrosis (IPF) is characterized by injury and loss of lung epithelial cells, accumulation of fibroblasts/myofibroblasts and abnormal remodeling of the lung parenchyma. The prognosis for IPF patients is poor and current therapies are largely ineffective in preventing respiratory failure. Current therapeutic approaches target epithelial cell replacement, manipulation of fibroblasts/myofibroblasts, modulation of procoagulant/fibrinolytic activities, cytokine and growth factor production, angiogenesis, and reduction of oxidative stress. Myofibroblasts are the primary effector cells in fibrosis. These cells may be derived by the activation and proliferation of resident lung fibroblasts, from epithelial-mesenchymal transition (EMT), or through recruitment of circulating fibrocytes. Transforming growth factor beta (TGFbeta) is a profibrotic factor that increases fibroblast proliferation, stimulates the synthesis and deposition of connective tissue, and inhibits connective tissue breakdown. TGFbeta acts through the promoter of the type 1 collagen gene causing increased collagen synthesis. In addition, TGFbeta induces EMT in alveolar epithelial cells (AECs) in vitro and in vivo. AECs exhibit substantial plasticity and may serve as a source of fibroblasts and/or myofibroblasts in lung fibrosis. Therapeutic interventions interfering with the pathways that lead to myofibroblast expansion and AEC apoptosis should be of considerable benefit in the treatment of IPF. This review will focus on the critical role of TGFbeta on AECs EMT and myofibroblasts in the development of fibrosis.