DNA methylation is a key mechanism for repression of gene expression, including that of α-smooth muscle actin (α-SMA) gene expression in fibroblasts. However, the trans-acting factors that interact with the methylated α-SMA gene to regulate its expression have not been identified. Using gel shift and chromatin immunoprecipitation (ChIP) assays, methyl CpG binding protein 2 (MeCP2) was shown to bind to the α-SMA gene. Suppression of MeCP2 gene expression by siRNA or its deficiency in lung fibroblasts isolated from MeCP2 knockout mice caused significant reduction of α-SMA gene expression. In contrast, transient transfection of MeCP2 expression plasmid into fibroblasts enhanced α-SMA gene expression. Moreover, in vivo studies revealed that compared to their wild type littermates, MeCP2-deficient mice exhibited significantly decreased alveolar wall thickness, inflammatory cell infiltration, interstitial collagen deposition, and myofibroblast differentiation in response to endotracheal injection of bleomycin. Thus, MeCP2 is essential for myofibroblast differentiation and pulmonary fibrosis.