Notch is an ancient cell-signaling system that regulates the specification of cell fate. This study examined the role of Notch in the epithelial-mesenchymal transition (EMT) and myofibroblast differentiation of cultured RLE-6TN cells (i.e., rat alveolar epithelial cells). The activation of Notch, either by ectopic expression of the Notch intracellular domain or by the co-culture of RLE-6TN cells with L-Jagged1 cells, induces the expression of smooth muscle α-actin (SMA) and other mesenchymal marker genes (collagen I and vimentin), and reduces the expression of epithelial marker genes (E-cadherin, occludin, and zonula occludens-1). The pharmacologic inhibition of the endogenous Notch signal significantly inhibited the transforming growth factor-β (TGF-β)-induced expression of SMA. Cell migratory capacity was increased by Notch. Luciferase assays revealed that the CC(A/T)(6)GG (CArG) box and the TGF-β control element (TCE) are required for Notch-induced SMA gene transcription. DNA microarray analysis revealed that members of the TGF-β family as well as Jagged1 were induced in RLE-6TN cells by Notch. Western blot analysis showed that Notch induced the phosphorylation of Smad3, and the TGF-β receptor type I/activin receptor-like kinase 5 (ALK5) kinase inhibitor SB431542 markedly reduced the Notch-induced expression of SMA. Enzyme-linked immunosorbent assays confirmed the production of TGF-β1 from RLE-6TN cells by Notch. Immunohistochemistry of a bleomycin-induced model of pulmonary fibrosis and lung specimens from patients with idiopathic interstitial pneumonias showed that Notch was strongly expressed in myofibroblasts, identified as SMA-positive cells. These data indicate that Notch induces myofibroblast differentiation through a TGF-β-Smad3 pathway that activates SMA gene transcription in a CArG-dependent and TCE-dependent manner in alveolar epithelial cells. Our data also imply that Notch induces the EMT phenotype, with increased migratory behavior in pulmonary fibrosis.