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Epithelial to mesenchymal cell transition (EMT), whereby fully differentiated epithelial cells transition to a mesenchymal phenotype, has been implicated in the pathogenesis of idiopathic pulmonary fibrosis (IPF). CXCR3 and its ligands are recognized to play a protective role in pulmonary fibrosis. In this study, we investigated the presence and extent of EMT and CXCR3 expression in human IPF surgical lung biopsies and assessed whether CXCR3 and its ligand CXCL9 modulate EMT in alveolar epithelial cells. Coexpression of the epithelial marker thyroid transcription factor-1 and the mesenchymal marker α-smooth muscle actin and CXCR3 expression was examined by immunohistochemical staining of IPF surgical lung biopsies. Epithelial and mesenchymal marker expression was examined by quantitative real-time PCR, Western blotting, and immunofluorescence in human alveolar epithelial (A549) cells treated with TGF-β1 and CXCL9, with Smad2, Smad3, and Smad7 expression and cellular localization examined by Western blotting. We found that significantly more cells were undergoing EMT in fibrotic versus normal areas of lung in IPF surgical lung biopsy samples. CXCR3 was expressed by type II pneumocytes and fibroblasts in fibrotic areas in close proximity to cells undergoing EMT. In vitro, CXCL9 abrogated TGF-β1–induced EMT. A decrease in TGF-β1–induced phosphorylation of Smad2 and Smad3 occurred with CXCL9 treatment. This was associated with increased shuttling of Smad7 from the nucleus to the cytoplasm where it inhibits Smad phosphorylation. This suggests a role for EMT in the pathogenesis of IPF and provides a novel mechanism for the inhibitory effects of CXCL9 on TGF-β1–induced EMT.