Expression of mutant surfactant protein C (SFTPC) results in endoplasmic reticulum (ER) stress in type II alveolar epithelial cells (AECs). AECs have been implicated as a source of lung fibroblasts via epithelial-to-mesenchymal transition (EMT); therefore, we investigated whether ER stress contributes to EMT as a possible mechanism for fibrotic remodeling. ER stress was induced by tunicamyin administration or stable expression of mutant (L188Q) SFTPC in type II AEC lines. Both tunicamycin treatment and mutant SFTPC expression induced ER stress and the unfolded protein response. With tunicamycin or mutant SFTPC expression, phase contrast imaging revealed a change to a fibroblast-like appearance. During ER stress, expression of epithelial markers E-cadherin and Zonula occludens-1 decreased while expression of mesenchymal markers S100A4 and α-smooth muscle actin increased. Following induction of ER stress, we found activation of a number of pathways, including MAPK, Smad, β-catenin, and Src kinase. Using specific inhibitors, the combination of a Smad2/3 inhibitor (SB431542) and a Src kinase inhibitor (PP2) blocked EMT with maintenance of epithelial appearance and epithelial marker expression. Similar results were noted with siRNA targeting Smad2 and Src kinase. Together, these studies reveal that induction of ER stress leads to EMT in lung epithelial cells, suggesting possible cross-talk between Smad and Src kinase pathways. Dissecting pathways involved in ER stress-induced EMT may lead to new treatment strategies to limit fibrosis.