Cell‐cell signaling roles for reactive oxygen species (ROS) generated in response to growth factors/cytokines in nonphagocytic cells are not well defined. In this study, we show that fibroblasts isolated from lungs of patients with idiopathic pulmonary fibrosis (IPF) generate extracellular hydrogen peroxide (H2O2) in response to the multifunctional cytokine, transforming growth factor‐β1 (TGF‐β1). In contrast, TGF‐β1 stimulation of small airway epithelial cells (SAECs) does not result in detectable levels of extracellular H2O2. IPF fibroblasts independently stimulated with TGF‐β1 induce loss of viability and death of overlying SAECs when cocultured in a compartmentalized Transwell system. These effects on SAECs are inhibited by the addition of catalase to the coculture system or by the selective enzymatic blockade of H2O2 production by IPF fibroblasts. IPF fibroblasts heterogeneously express α‐smooth muscle actin stress fibers, a marker of myofibroblast differentiation. Cellular localization of H2O2 by a fluorescent‐labeling strategy demonstrated that extracellular secretion of H2O2 is specific to the myofibroblast phenotype. Thus, myofibroblast secretion of H2O2 functions as a diffusible death signal for lung epithelial cells. This novel mechanism for intercellular ROS signaling may be important in physiological/pathophysiological processes characterized by regenerating epithelial cells and activated myofibroblasts.