Excessive architectural re-modeling of tissues in pulmonary fibrosis due to proliferation of myofibroblasts and deposition of extracellular matrix adversely affects the elasticity of the alveoli and lung function. Progressively destructive chronic inflammatory disease, therefore, necessitates safe and effective non-invasive airway delivery that can reach deep alveoli, restore the surfactant function and reduce oxidative stress. We designed an endogenous surfactant-based liposomal delivery system of naringin to be delivered as an aerosol that supports pulmonary mechanics for the management of pulmonary fibrosis. Phosphatidylcholine-based liposomes showed 91.5 ± 2.4% encapsulation of naringin, with a mean size of 171.4 ± 5.8 nm and zeta potential of −15.5 ± 1.3 mV. Liposomes with the unilamellar structure were found to be spherical and homogeneous in shape using electron microscope imaging. The formulation showed surface tension of 32.6 ± 0.96 mN/m and was able to maintain airway patency of 97 ± 2.5% for a 120 s test period ensuring the effective opening of lung capillaries and deep lung delivery. In vitro lung deposition utilizing Twin Stage Impinger showed 79 ± 1.5% deposition in lower airways, and Anderson Cascade Impactor deposition revealed a mass median aerodynamic diameter of 2.35 ± 1.02 μm for the aerosolized formulation. In vivo efficacy of the developed formulation was analyzed in bleomycin-induced lung fibrosis model in rats after administration by the inhalation route. Lactate dehydrogenase activity, total protein content, and inflammatory cell infiltration in broncho-alveolar lavage fluid were substantially reduced by liposomal naringin. Oxidative stress was minimized as observed from levels of antioxidant enzymes. Masson’s Trichrome staining of lung tissue revealed significant amelioration of histological changes and lesser deposition of collagen. Overall results indicated the therapeutic potential of the developed non-invasive aerosol formulation for the effective management of pulmonary fibrosis.