Idiopathic pulmonary fibrosis is an incurable fibrosing disorder that progresses relentlessly to respiratory failure. We hypothesized that a product of heme oxygenase activity, carbon monoxide (CO), may have anti-fibrotic effects. To test this hypothesis, mice treated with intratracheal bleomycin were exposed to low-concentration inhaled CO or ambient air. Lungs of mice treated with CO had significantly lower hydroxyproline accumulation than controls. Fibroblast proliferation, thought to play a central role in the progression of fibrosis, was suppressed by in vitro exposure to CO. CO caused increased cellular levels of p21(Cip1) and decreased levels of cyclins A and D. This effect was independent of the observed suppression of MAPK's phosphorylation by CO but was dependent on increased cGMP levels. Further, CO-exposed cells elaborated significantly less fibronectin and collagen-1 than control cells. This same effect was seen in vivo. Suppression of collagen-1 production did not depend on MAPK or guanylate cyclase signaling pathways but did depend on the transcriptional regulator Id1. Taken together, these data suggest that CO exerts an anti-fibrotic effect in the lung, and this effect may be due to suppression of fibroblast proliferation and/or suppression of matrix deposition by fibroblasts.