Chronic injury of alveolar lung epithelium leads to epithelial disintegrity in idiopathic pulmonary fibrosis (IPF). We had reported earlier that Grhl2, a transcriptional factor maintains alveolar epithelial cell integrity by directly regulating components of adherens and tight junctions and thus hypothesized an important role of GRHL2 in pathogenesis of IPF. Comparison of GRHL2 distribution at different stages of human lung development showed its abundance in developing lung epithelium and in adult lung epithelium. However, GRHL2 is detected in normal human lung mesenchyme only at early fetal stage (week 9). Similar Mesenchymal re-expression of GRHL2 was also observed in IPF. Immunofluorescence analysis in serial sections from three IPF patients revealed at least two subsets of alveolar epithelial cells (AEC), based on differential GRHL2 expression and the converse fluorescence intensities for epithelial versus mesenchymal markers. Grhl2 was not detected in mesenchyme in IP bleomycin-induced injury as well as in spontaneously occurring fibrosis in HPS1/2 mutant mice, while in contrast in a radiation-induced fibrosis model, with forced Forkhead box M1 (Foxm1) expression, an overlap of Grhl2 with a mesenchymal marker was observed in fibrotic regions. Grhl2's role in alveolar epithelial cell-plasticity was confirmed by altered Grhl2 gene expression analysis in IPF and further by in vitro manipulation of its expression in alveolar epithelial cell lines. Our findings reveal important patho-physiological differences between human IPF and specific mouse models of fibrosis and support a crucial role of GRHL2 in epithelial activation in lung fibrosis and perhaps also in epithelial plasticity.