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Idiopathic pulmonary fibrosis (IPF) is a progressive interstitial lung disease and associated with high mortality. Excessive deposition of extracellular matrix by activated myofibroblasts in the alveolar interstitial space leads to scar formation that hinders gas exchange. Stromal derived growth factor (SDF-1) plays important role in tissue repair and remodelling and may therefore act as a novel antifibrotic mediator. We therefore investigated the effect of SDF-1β on lung injury and fibrosis using the bleomycin injured rat lung model. Invivo electroporation-mediated SDF-1 gene transfer was performed (pSDF-1) and after 7 days compared to control (electroporation of empty vector (EV). In presence of SDF-1, total collagen was reduced (252.3±50.1 vs 554.5±97.4 ug/mg of lung tissue), fibrotic histology was improved (quantified by decrease in the modified Ashcroft`s score in SDF-1 2.26±0.74 compared to EV 3.03±0.90), collagen fibrils were reduced and TNF-α mediated apoptosis of myofibroblasts was induced (36.09±8.36 vs 41.96±6.62). In addition, SDF-1 overexpression increased alveolar epithelial cell (AEC) numbers and AEC proliferation in vivo (58.91±2.01% vs 33.06±3.19% compared to EV) and induced AEC migration in vitro as measured by alveolar epithelial wound healing (100±0% vs 8.76±5.30% in 24 hours). Our study demonstrates a new antifibrotic effect of SDF-1 that is due to modulating lung (myo)fibroblasts and AEC.