The alveolar epithelium is characteristically abnormal in fibrotic lung disease, and we recently established a direct link between injury to the type II alveolar epithelial cell (AEC) and the accumulation of interstitial collagen. The mechanisms by which damage to the epithelium induces lung scarring remain poorly understood. It is particularly controversial whether an insult to the type II AEC initiates an inflammatory response that is required for the development of fibrosis. To explore whether local inflammation occurs following a targeted epithelial insult and contributes to lung fibrosis, we administered diphtheria toxin to transgenic mice with type II AEC–restricted expression of the diphtheria toxin receptor. We used immunophenotyping techniques and diphtheria toxin receptor–expressing, chemokine receptor-2–deficient (CCR2−/−) mice to determine the participation of lung leukocyte subsets in pulmonary fibrogenesis. Our results demonstrate that targeted type II AEC injury induces an inflammatory response that is enriched for CD11b+ nonresident exudate macrophages (ExM) and their precursors, Ly-6C high monocytes. CCR2 deficiency abrogates the accumulation of both cell populations and protects mice from fibrosis, weight loss, and death. Further analyses revealed that the ExM are alternatively activated and that ExM and Ly-6C high monocytes express mRNA for IL-13, TGF-β, and the collagen genes, COL1A1 and COLIIIA1. Furthermore, the accumulated ExM and Ly-6C high monocytes contain intracellular collagen, as detected by immunostaining. Together, these results implicate CCR2 and the accumulation of ExM and Ly-6C high monocytes as critical determinants of pulmonary fibrosis induced by selective type II AEC injury.