Decreased circulating protein C and increased circulating thrombomodulin are markers of the prothrombotic, antifibrinolytic state associated with poor outcomes in sepsis but have not been measured in patients with ALI (acute lung injury)/ARDS (acute respiratory distress syndrome). We measured circulating and intra-alveolar protein C and thrombomodulin in 45 patients with ALI/ARDS from septic and nonseptic causes and correlated the levels with clinical outcomes. Plasma protein C levels were lower in ALI/ARDS compared with normal. Lower levels of protein C were associated with worse clinical outcomes, including death, fewer ventilator-free days, and more nonpulmonary organ failures, even when only patients without sepsis were analyzed. Levels of thrombomodulin in pulmonary edema fluid from ALI/ARDS patients were >10-fold higher than normal plasma and 2-fold higher than ALI/ARDS plasma. Higher edema fluid thrombomodulin levels were associated with worse clinical outcomes. The higher levels in edema fluid compared with plasma suggest local release of soluble thrombomodulin in the lung, possibly from a lung epithelial source. To determine whether lung epithelial cells can release thrombomodulin, A549 cells and primary isolates of human alveolar type II cells were exposed to H2O2 or inflammatory cytokines. Both epithelial cell types released thrombomodulin into the media. In summary, the protein C system is markedly disrupted in patients with ALI/ARDS from both septic and nonseptic causes. The protein C system may be a potential therapeutic target in patients with ALI/ARDS.