Telomeres are short in type II alveolar epithelial cells (AECs) of patients with idiopathic pulmonary fibrosis (IPF). Whether dysfunctional telomeres contribute directly to development of lung fibrosis remains unknown. The objective of this study was to investigate whether telomere dysfunction in type II AECs, mediated by deletion of the telomere shelterin protein TRF1, leads to pulmonary fibrosis in mice (SPC-Cre TRF1 fl/fl mice). Deletion of TRF1 in type II AECs for 2 weeks increased γH2AX DNA damage foci, but not histopathologic changes in the lung. Deletion of TRF1 in type II AECs for up to 9 months resulted in short telomeres and lung remodeling characterized by increased numbers of type II AECs, α-smooth muscle actin+ mesenchymal cells, collagen deposition, and accumulation of senescence-associated β-galactosidase+ lung epithelial cells. Deletion of TRF1 in collagen-expressing cells caused pulmonary edema, but not fibrosis. These results demonstrate that prolonged telomere dysfunction in type II AECs, but not collagen-expressing cells, leads to age-dependent lung remodeling and fibrosis. We conclude that telomere dysfunction in type II AECs is sufficient to cause lung fibrosis, and may be a dominant molecular defect causing IPF. SPC-Cre TRF1 fl/fl mice will be useful for assessing cellular and molecular mechanisms of lung fibrosis mediated by telomere dysfunction.