Mitogen-activated protein kinase (MAPK) phosphatase 5 (MKP-5) is a member of the dual-specificity family of protein tyrosine phosphatases that negatively regulates p38 MAPK and the JNK. MKP-5-deficient mice exhibit improved muscle repair and reduced fibrosis in an animal model of muscular dystrophy. Here, we asked whether the effects of MKP-5 on muscle fibrosis extend to other tissues. Using a bleomycin-induced model of pulmonary fibrosis, we found that MKP-5-deficient mice were protected from the development of lung fibrosis, expressed reduced levels of hydroxyproline and fibrogenic genes, and displayed marked polarization towards an M1-macrophage phenotype. We showed that the profibrogenic effects of the transforming growth factor-β1 (TGF-β1) were inhibited in MKP-5-deficient lung fibroblasts. MKP-5-deficient fibroblasts exhibited enhanced p38 MAPK activity, impaired Smad3 phosphorylation, increased Smad7 levels, and decreased expression of fibrogenic genes. Myofibroblast differentiation was attenuated in MKP-5-deficient fibroblasts. Finally, we found that MKP-5 expression was increased in idiopathic pulmonary fibrosis (IPF)-derived lung fibroblasts but not in whole IPF lungs. These data suggest that MKP-5 plays an essential role in promoting lung fibrosis. Our results couple MKP-5 with the TGF-β1 signaling machinery and imply that MKP-5 inhibition may serve as a therapeutic target for human lung fibrosis.