Obliterative bronchiolitis (OB) is thought to be a form of chronic allograft rejection. However, immunosuppressive therapy is not effective once fibrosis has developed. We hypothesize that disordered tissue remodeling is a mechanism for the pathogenesis of OB. We examined allograft airway fibrosis in an intrapulmonary tracheal transplant model of OB. Allograft airways were completely obliterated at day 21 by fibrotic tissue; however, tissue remodeling continued thereafter, as demonstrated by the change of collagen deposition density, shift from type I to type III collagen, shift from fibroblasts to myofibroblasts and shift of expression profiles and activities of matrix metalloproteinases (MMPs). We then used a broad-spectrum MMP inhibitor, SC080, to attempt to manipulate tissue remodeling. Administration of the MMP inhibitor from day 0 to day 28 reduced airway obliteration, without inhibiting T-cell activation. MMP inhibition from day 14 to day 28 showed similar effects on airway obliteration. MMP inhibition from day 21 to day 35 did not reverse the airway obliteration, but significantly reduced the collagen deposition, type III collagen and myofibroblasts in the lumen. We conclude that tissue remodeling plays a critical role in the development and maintenance of fibrosis after transplantation.