Idiopathic pulmonary fibrosis (IPF) is a chronic, progressive interstitial lung disease of unknown cause. IPF has a distinct histopathological pattern of usual interstitial pneumonia in which fibroblastic foci (FF) represent the leading edge of fibrotic destruction of the lung. Currently there are three major hypotheses for how FF are generated: (1) from resident fibroblasts, (2) from bone marrow-derived progenitors of fibroblasts, and (3) from alveolar epithelial cells that have undergone epithelial-mesenchymal transition (EMT). We found that FF dissociated capillary vessels from the alveolar epithelia, the basement membranes of which are fused in normal physiological conditions, and pushed the capillaries and elastic fibers down ~100 μm below the alveolar epithelia. Furthermore, the alveolar epithelial cells covering the FF exhibited a partial EMT phenotype. In addition, normal human alveolar epithelial cells in vitro underwent dynamic EMT in response to transforming growth factor-β signaling within 72 h. Because it seems that resident fibroblasts or bone marrow-derived cells cannot easily infiltrate and form FF between the alveolar epithelia and capillaries in tight contact with each other, FF are more likely to be derived from the epithelial-to-mesenchymal transitioned alveolar epithelia located over them. Moreover, histology and immunohistochemistry suggested that the FF formed in the lung parenchyma disrupt blood flow to the alveolar septa, thus destroying them. Consequently, collapse of the alveolar septa is likely to be the first step toward honeycombing in the lung during late stage IPF. On the basis of these findings, inhibition of transforming growth factor-β signaling, which can suppress EMT of the alveolar epithelial cells in vitro, is a potential strategy for treating IPF.