Keloid formation has been linked to aberrant fibroblast activity, exacerbated by growth factors and inflammatory mediators. Prostaglandin E2 (PGE2), synthesized from arachidonic acid by cyclooxygenases (COX) and synthases (PGES), acts as both an inflammatory mediator and fibroblast modulator. Although PGE2 has known antifibrotic effects in the lower airway, its role in dermal fibrosis in general, and keloid formation in particular, remains unclear. This study focused on: (1) the effects of PGE2 on keloid fibroblast migration, contraction, and collagen synthesis and (2) endogenous PGE2 synthesis in response interleukin-1beta. PGE2 decreased keloid fibroblast migration and contraction via an EP2/EP4-cAMP mechanism that disrupted actin cytoskeletal dynamics and reversed transforming growth factor-beta1-induced collagen I and III synthesis. Impaired fibroblast PGE2 production has been linked to lower airway fibrosis and recently to keloid formation. Here, we showed that interleukin-1beta stimulation leads to nuclear factor-kappaB translocation to the nucleus, resulting in up-regulation of COX-2 and microsomal PGE2 synthase 1. Up-regulation of COX-2 in, and secretion of PGE2 by keloid fibroblasts are diminished compared with their normal fibroblast counterparts. We suggest that the antifibrotic effects of PGE2 during keloid formation are potentially diminished due to aberrant paracrine fibroblast signaling. Exogenous PGE2 may supplement decreased endogenous levels and inhibit keloid formation or progression.