Transgenic mice expressing transforming growth factor alpha (TGF-alpha) in type II cells under control of the lung-specific surfactant protein-C (SP-C) promoter develop pulmonary fibrosis and marked airspace hypoplasia. To identify cellular signaling mechanisms involved in lesion formation, we generated transgenic mice expressing a mutant epidermal growth factor receptor lacking a portion of the intracytoplasmic domain (EGF-R-M) under control of the human SP-C promoter. Transcripts of the SP-C-EGF-R-M transgene were detected in distal bronchiolar and type II cells by in situ hybridization. The morphology of lungs from the SP-C-EGF-R-M transgenic mice was normal. Lung fibrosis was not detectable and airspace hypoplasia was significantly corrected in bitransgenic mice derived by breeding SP-C-TGF-alpha and SP-C-EGF-R-M mice. Correction of lung pathology in the bitransgenic mice occurred without altering the level of hTGF-alpha mRNA. To further demonstrate that reversal of TGF-alpha lesions required signaling through the EGF-R, SP-C-TGF-alpha transgenic mice were bred to mice homozygous for the wa-2 mutation which encodes a mutated EGF-R. TGF-alpha-induced lesions were reversed in homozygous wa-2 mice. Amelioration of TGF-alpha-dependent pulmonary lesions in SP-C-EGF-R-M mice or wa-2/wa-2 mice supports the concept that autocrine and paracrine signaling mediate fibrosis and airspace remodeling caused by TGF-alpha.