Epithelial-mesenchymal interactions are of critical importance during tissue morphogenesis and repair. Although the cellular and molecular aspects of many of these interactions are beginning to be understood, the ability of epithelial cells to regulate fibroblast interstitial matrix production has not been extensively studied. We report here that cultured alveolar epithelial cells are capable of modulating the expression of tropoelastin, the soluble precursor of the interstitial lung matrix component elastin, by lung fibroblasts. Phorbol ester-stimulated alveolar epithelial cells secrete a soluble factor that causes a time- and dose-dependent repression of lung fibroblast tropoelastin mRNA expression. This alveolar epithelial cell-mediated repressive activity is specific for tropoelastin, is effective on lung fibroblasts from multiple stages of development, and acts at the level of transcription. Partial characterization of the repressive activity indicates it is an acid-stable, pepsin-labile protein. Gel fractionation of alveolar epithelial cell conditioned medium revealed two peaks of activity with relative molecular masses of approximately 25 and 50 kDa. These data support a role for epithelial cells in the regulation of fibroblast interstitial matrix production.