Notch is an ancient cell signaling system that regulates cell fate specification. This study examined the role of Notch in epithelial-mesenchymal transition (EMT) and myofibroblast differentiation of cultured RLE-6TN cells, rat alveolar epithelial cells. Activation of Notch, either by ectopic expression of Notch intracellular domain or by coculture of RLE-6TN cells with L-Jagged1 cells, induced the expression of the smooth muscle α-actin (SMA) and other mesenchymal marker genes (collagen I and vimentin) and reduced the expression of the epithelial marker genes (E-cadherin, occludin and zonula occludens-1). Pharmacological inhibition of endogenous Notch signal significantly inhibited transforming growth factor-β (TGF-β)-induced SMA expression. Cell migratory capacity was increased by Notch. Luciferase assays revealed that CArG box and TGF-β-control element (TCE) are required for Notch-induced SMA gene transcription. DNA microarray analysis revealed that members of TGF-β family as well as Jagged1 were induced in RLE-6TN cells by Notch. Western blot analysis showed that Notch induced phosphorylation of Smad3 and TGF-β receptor typeI/ALK5 kinase inhibitor SB431542 markedly reduced Notch-induced SMA expression. Enzyme-linked immunosorbent assays confirmed the production of TGF-β1 from RLE-6TN cells by Notch. Immunohistochemistry of bleomycin-induced pulmonary fibrosis model and lung specimens from idiopathic interstitial pneumonias patients showed that Notch was strongly expressed in myofibroblasts as identified as SMA-positive cells. These data indicate that Notch induces myofibroblast differentiation through TGF-ß/Smad3 pathway which activates SMA gene transcription in a CArG- and TCE-dependent manner in alveolar epithelial cells. Our data also imply that Notch induces EMT phenotype with an increased migratory behavior in pulmonary fibrosis.