Cryptogenic fibrosing alveolitis (CFA), extrinsic allergic alveolitis (EAA), and sarcoid are all immunologically mediated forms of interstitial lung disease. In contrast to most patients with EAA and sarcoid, patients with CFA show relentless pulmonary fibrosis which is unresponsive to immunosuppressive therapy. Previous studies have indicated a possible role for epithelial‐derived cytokines in the regulation of immunological and fibrotic responses in the lung. This study has examined lung biopsy specimens from patients with CFA, EAA, and sarcoid for immunoreactive interleukin 4 (IL4) and interferon‐γ (INFγ) expression by type II alveolar epithelial cells, as these cytokines have been suggested to have in vitro stimulatory and inhibitory effects on fibroblast function. In addition, mRNA in situ hybridization was performed on the CFA lung biopsies to confirm transcription of these cytokine genes within the cells. The results show that type II epithelial cells in EAA and sarcoid show up‐regulation of immunoreactivity for both IL4 and INF‐γ, but that in CFA only IL4 is detectable. The mRNA in situ hybridization results indicate that this may represent post‐transcriptional regulation of INFγ expression in CFA. These results are consistent with previous observations of a paucity of INFγ and a predominantly type II (Th2‐like) pattern of immune response in patients with CFA and suggest a possible imbalance of pro‐fibrogenic cytokines in the distal lung of patients with this condition, compared with those with EAA or sarcoid. Copyright © 1999 John Wiley & Sons, Ltd.