We speculated that peroxisome proliferator-activated receptor (PPAR)-γ agonists may modulate the oxidative stress pathway to ameliorate the development of airway inflammation. The effect of Monascus-fermented metabolite monascin (MS) and rosiglitazone (Rosi) on oxidative stress-induced lung inflammation was evaluated. Luciferase assay and DNA binding activity assay were used to point out that MS may be a novel PPAR-γ agonist and nuclear factor-erythroid 2 related factor 2 (Nrf-2) activator. We used hydrogen peroxide (H2O2) to induce inflammation in lung epithelial cells. MS and Rosi prevented H2O2-induced ROS generation in A549 epithelial cells through PPAR-γ translocation, avoiding inflammatory mediator expression via inhibiting nuclear factor (NF)-κB translocation. The regulatory ability of MS was abolished by siRNA against PPAR-γ. MS also elevated antioxidant enzyme expression via Nrf-2 activation. Both PPAR-γ and Nrf-2 might have benefits against lung inflammation. MS regulated PPAR-γ and Nrf-2 to improve lung oxidative inflammation.