Three isoforms of transforming growth factor-beta (TGF-beta) are found in mammalian cells and are potent regulators of inflammation, connective tissue synthesis, cellular proliferation, and differentiation. To determine the distribution and regulation of TGF-beta isoforms during pulmonary injury, a rat model of bleomycin-induced lung inflammation and repair was used. Using immunohistochemistry, we demonstrate that TGF-beta 2 and TGF-beta 3 were localized to alveolar macrophages as well as epithelial and smooth muscle cells of both normal rat lungs and rat lungs obtained at all time intervals after bleomycin administration. Early in bleomycin-induced lung injury, when there is active proliferation of type II alveolar epithelial cells, there was an increase in the number of type II alveolar epithelial cells isolated per lung and an increase in DNA synthesis by explanted type II alveolar epithelial cells. At this time, the secretion of biologically active TGF-beta 1-3, which are potent inhibitors of epithelial cell proliferation, was decreased. However, the secretion of TGF-beta 1-3 activity was markedly increased later in the injury response and coincided with a reduction in the number of type II alveolar epithelial cells isolated per lung and DNA synthesis in vitro. Furthermore, the addition of TGF-beta 1, 2, and 3 to cultures of actively proliferating type II alveolar epithelial cells resulted in inhibition of [3H]thymidine incorporation, whereas, in the presence of anti-TGF-beta 1-3 antibody, there was an increase in [3H]thymidine incorporation. Our findings suggest that altered secretion of TGF-beta 1-3 activity by type II alveolar epithelial cells during bleomycin-induced lung injury may regulate pulmonary alveolar epithelial cell proliferation during injury and repair phases.