Loss of epithelial barrier integrity is implicated in a number of human lung diseases. However, the molecular pathways underlying this process are poorly understood. In a phenotypic screen, we identified Axl kinase as a negative regulator of epithelial phenotype and function. Furthermore, suppression of Axl activity by a small molecule kinase inhibitor or downregulation of Axl expression by small interfering RNA led to: (1) the increase in epithelial surfactant protein expression; (2) a cell morphology transition from front-rear polarity to cuboidal shape; (3) the cytoskeletal re-organization resulting in decreased cell mobility; and (4) the acquisition of epithelial junctions. Loss of Axl activity reduced activation of the Axl canonical pathway members, Akt and extracellular signal-regulated kinase-1/2 and resulted in the loss of gene expression of a unique profile of epithelial-to-mesenchymal transition transcription factors including SNAI2, HOXA5, TBX2 or TBX3. Finally, we observed that Axl was activated in hyperplasia of epithelial cells in idiopathic pulmonary fibrosis where epithelial barrier integrity was lost. These results suggest that the Axl kinase signaling pathway is associated with the loss integrity of alveolar epithelium in pathological remodeling of human lung diseases.