Glutathione (GSH) is a ubiquitous antioxidant in lung epithelial cells and lung lining fluid. Transforming growth factor beta1 (TGF-beta1) is a pleiotropic cytokine involved in cellular proliferation and differentiation. The level of TGF-beta1 is elevated in many chronic inflammatory lung disorders associated with oxidant/antioxidant imbalance. In this study, we show that TGF-beta1 depletes GSH by down-regulating expression of the enzyme responsible for its formation, gamma-glutamylcysteine synthetase (gamma-GCS) and induces reactive oxygen species production in type II alveolar epithelial cells (A549). To investigate the molecular mechanisms of inhibition of glutathione synthesis, we employed reporters containing fragments from the promoter region of the gamma-GCS heavy subunit (h), the gene that encodes the catalytic subunit of gamma-GCS. We found that TGF-beta1 reduced the expression of the long gamma-GCSh construct (-3802/GCSh-5'-Luc), suggesting that an antioxidant response element (ARE) may be responsible for mediating the TGF-beta1 effect. Interestingly, the electrophoretic mobility shift assay revealed that the DNA binding activity of both activator protein-1 (AP-1) and ARE was increased in TGF-beta1-treated epithelial cells. The gamma-GCSh ARE contains a perfect AP-1 site embedded within it, and mutation of this internal AP-1 sequence, but not the surrounding ARE, prevented DNA binding. Further studies revealed that c-Jun and Fra-1 dimers, members of the AP-1 family previously shown to exert a negative effect on phase II gene expression, bound to the ARE sequence. We propose a novel mechanism of gamma-GCSh down-regulation by TGF-beta1 that involves the binding of c-Jun and Fra-1 dimers to the distal promoter. The findings of this study provide important information, which may be used for the modulation of glutathione biosynthesis in inflammation.