Trophic interactions between pulmonary epithelial and mesenchymal cell types, known as the epithelial-mesenchymal trophic unit (EMTU), are crucial in lung development and lung disease. Transforming growth factor (TGF)-beta is a key factor in mediating these interactions, but it is expressed in a latent form that requires activation to be functional. Using intact fetal tracheal tissue and primary cultures of fetal tracheal epithelial cells and fibroblasts, we demonstrate that a subset of integrins, alpha(v)beta(6) and alpha(v)beta(8), are responsible for almost all of the TGF-beta activation in the EMTU. Both alpha(v)beta(8) and alpha(v)beta(6) contribute to fetal tracheal epithelial activation of TGF-beta, whereas only alpha(v)beta(8) contributes to fetal tracheal fibroblast activation of TGF-beta. Interestingly, fetal tracheal epithelial alpha(v)beta(8)-mediated TGF-beta activation can be enhanced by phorbol esters, likely because of the increased activity of MT1-MMP, an essential co-factor in alpha(v)beta(8)-mediated activation of TGF-beta. Autocrine alpha(v)beta(8)-mediated TGF-beta activation by fetal tracheal fibroblasts results in suppression of both transcription and secretion of hepatocyte growth factor, which is sufficient to affect phosphorylation of the airway epithelial hepatocyte growth factor receptor, c-Met, as well as airway epithelial proliferation in a co-culture model of the EMTU. These findings elucidate the function and complex regulation of integrin-mediated activation of TGF-beta within the EMTU.