Idiopathic pulmonary fibrosis (IPF), ie, usual interstitial pneumonia in histopathology, is a disease characterized by tissue destruction and active areas of fibroproliferation in the lung. Gremlin (Drm), a member of the cysteine knot family of bone morphogenetic protein (BMP) inhibitors, functions to antagonize BMP-4-mediated signals during lung development. We describe here consistent overexpression of gremlin in the lung interstitium of IPF patients. Quantitative real-time reverse transcriptase-polymerase chain reaction analyses revealed considerably higher levels of gremlin mRNA in lung biopsies from IPF patients, the highest level being 35-fold higher compared to controls. Lung fibroblasts isolated from IPF patients also expressed elevated levels of gremlin, which was associated with impaired responsiveness to endogenous and exogenous BMP-4. Transforming growth factor-β-induced epithelial-to-mesenchymal transition of A549 lung epithelial cells in culture was also associated with induction of gremlin mRNA expression. In addition, A549 cells transfected to overexpress gremlin were more susceptible to transforming growth factor-β-induced epithelial-to-mesenchymal transition. Gremlin-mediated inhibition of BMP-4 signaling pathways is likely to enhance the fibrotic response and reduce epithelial regeneration in the lung. The overexpression of this developmental gene in IPF may be a key event in the persistence of myofibroblasts in the lung interstitium and provides a potential target for therapeutic intervention.