Interstitial lung disease (ILD) is a pulmonary disorder characterized by a combination of inflammation and fibrosis in the lung parenchyma, which initiates with the dysfunction of alveolar epithelial cells (AECs). The alveolar cells secrete surfactant proteins that lowers the surface tension of fluids in the lungs and maintains the stability of pulmonary tissue. Mutations on surfactant protein C (SFTPC), particularly I73T, are associated with a toxic gain of function that causes misfolding and the accumulation of immature SFTPC proteins, triggering pulmonary fibrosis (PF). Therefore, it is crucial to block the accumulation of the SFTPC protein during ILD progression. We used a loss-of-function-based CRISPR/Cas9 library kit to screen genome-wide for deubiquitinating enzymes that regulate the SFTPC protein. The interaction between USP11 and SFTPC and its ubiquitination status was validated by immunoprecipitation and the TUBEs assay. HDR-directed knock-in of the I73T mutation into the locus in human induced pluripotent stem cells (hiPSCs) was performed using the CRISPR/Cas9 system, and then those cells were differentiated into alveolar organoids (AOs) using a forced aggregation protocol. The clinical relevance of the USP11 inhibitor and its effect on preventing PF were investigated in a TGF-β-induced fibrosis in AOs and bleomycin (BLM)-induced mouse model. We identified USP11 as a novel deubiquitinase that interacts with, stabilizes, deubiquitinates, and extends the half-life of SFTPC. Remarkably, USP11 stabilized and prolonged the half-life of the SFTPC mutant protein significantly more than the wild type. In vitro functional studies revealed that USP11 exacerbates SFTPC -induced fibrosis and enhances the epithelial-to-mesenchymal transition. Furthermore, we present a human in vitro model for investigating -induced fibrosis: hiPSCs-derived-AOs carrying the pathogenic variant. Interestingly, USP11 depletion in the organoids mitigated SFTPC -induced fibrosis. Finally, pharmacological inhibition of USP11 prevented PF caused by TGF-β in hiPSCs-SFTPC-AOs and BLM-induced mouse model, underscoring its therapeutic potential. Altogether, USP11 is a major protein stabilizer of SFTPC, and the clinical inhibition of USP11 during PF could be a novel therapeutic approach for ILD patients.