Idiopathic pulmonary fibrosis (IPF) is a progressive disease that causes unremitting deposition of extracellular matrix proteins, thus resulting in distortion of the pulmonary architecture and impaired gas exchange. Associated with high morbidity and mortality, IPF is generally refractory to current pharmacological therapies. Lefty A, a potent inhibitor of transforming growth factor (TGF)-β signaling, has been shown to have promising antifibrotic ability in vitro for the treatment of renal fibrosis and other potential organ fibroses. Here, we determined if Lefty A can attenuate bleomycin (BLM)-induced pulmonary fibrosis in vivo based on a novel therapeutic strategy where HEK293 cells are genetically engineered with the Lefty A-associated GFP gene. The engineered HEK293 cells were encapsulated in alginate microcapsules and then subcutaneously implanted in ICR mice that had one week earlier been intratracheally administered BLM to induce pulmonary fibrosis. The severity of fibrosis in lung tissue was assessed using pathological morphology and collagen expression to examine the effect of Lefty A released from the microencapsulated cells. The engineered HEK293 cells with Lefty A significantly reduced the expression of connective tissue growth factor (CTGF) and type I collagen messenger mRNA, lessened the morphological fibrotic effects induced by bleomycin, and increased the expression of matrix metalloproteinase (MMP)-9. This illustrates that engineered HEK293 cells with Lefty A can attenuate pulmonary fibrosis in vivo, thus providing a novel method to treat human pulmonary fibrotic disease and other organ fibroses.