Idiopathic pulmonary fibrosis (IPF) is a progressive and incurable lung disease characterized by tissue scarring that disrupts gas exchange. Epithelial cell dysfunction, fibroblast activation, and excessive extracellular matrix deposition drive this pathology that ultimately leads to respiratory failure. Mechanistic studies have shown that repeated injury to alveolar epithelial cells initiates an aberrant wound-healing response by surrounding fibroblasts through secretion of mediators like transforming growth factor beta (TGF- β), yet the precise biological pathways contributing to disease progression are not fully understood. To better study these interactions there is a critical need for lung models that replicate the cellular heterogeneity, geometry, and biomechanics of the distal lung microenvironment. In this study, induced pluripotent stem cell-derived alveolar epithelial type II (iATII) cells and human pulmonary fibroblasts were arranged to replicate key features of human lung micro-architecture and embedded in soft or stiff poly(ethylene glycol) norbornene (PEG-NB) hydrogels that recapitulated the mechanical properties of healthy and fibrotic lung tissue, respectively. The co-cultured cells were then exposed to pro-fibrotic cytokines and growth factors. iATIIs and fibroblasts exhibited differentiation pathways and gene expression patterns consistent with trends observed during IPF progression in vivo. A design of experiments statistical analysis identified stiff hydrogels combined with pro-fibrotic biochemical cue exposure as the most effective condition tested in this study for modeling fibrosis in vitro. Finally, treatment with Nintedanib, one of only two Food and Drug Administration (FDA)-approved drugs for IPF, was assessed. Treatment reduced fibroblast activation, as indicated by downregulation of key activation genes, and upregulated several epithelial genes involved in alveolar repair. These findings demonstrate that human 3D co-culture models hold are a promising tool for advancing our understanding of IPF and identifying new therapeutic targets. STATEMENT OF SIGNIFICANCE: This study leverages advanced biomaterials and biofabrication techniques to engineer physiologically relevant, donor-specific, and sex-matched models of pulmonary fibrosis, addressing the critical need for pre-clinical therapeutic drug screening platforms. These human 3D lung models successfully replicated key features of fibrotic lung tissue. Tuning microenvironmental stiffness of 3D PEG-NB hydrogels to match fibrotic lung values and exposing human iATII cells and fibroblasts to pro-fibrotic biochemical cues recreated hallmark characteristics of in vivo fibrosis pathogenesis, including epithelial differentiation and loss, as well as fibroblast activation. The utility of these models was further validated by demonstrating responsiveness to Nintedanib, a clinically available treatment for IPF. These findings highlight the transformative potential of well-defined biomaterial-based 3D models for elucidating complex disease mechanisms and accelerating therapeutic drug discovery for chronic pulmonary diseases like idiopathic pulmonary fibrosis.