During inflammatory lung injury, the fibrinolytic activity that is normally present within bronchoalveolar lavage (BAL) fluid (BALF) is often suppressed due to increased levels of inhibitors, including plasminogen activator inhibitor (PAI)-1. Despite this suppression, BALF frequently contains fibrin degradation products, indicating persistence of fibrinolytic activity within the lung. To address this discrepancy and determine the sites where plasminogen activation is occurring, we developed an in situ zymographic technique for frozen sections of lung tissue that localizes plasminogen activator activity at the cellular level. After validating the method using enzyme inhibitors and mice with genetic manipulations of their plasminogen system genes, we applied the technique to lungs of normal and bleomycin-exposed mice. In normal mice, plasminogen activator activity was localized to bronchial epithelial cells, cells of the alveolar walls, and alveolar macrophages. After bleomycin exposure, in situ zymography showed that, despite loss of fibrinolytic activity within BALF, abundant enzymatic activity was associated with aggregates of inflammatory cells. PAI-1-deficient mice that are protected from bleomycin-induced fibrosis had preserved plasminogen activator activity in BALF and increased tissue activity, as determined by in situ zymography. We conclude that analysis of BALF does not adequately reflect the fibrinolytic activity that persists within microenvironments of the lung during inflammation.