We investigated whether intraalveolar inflammatory cells such as alveolar macrophages or lymphocytes produced the gene product of a type-C human endogenous retrovirus (HERV), HERV-E 4-1, which might initiate an immune response resulting in interstitial lung disease. We evaluated HERV-E 4-1 Env protein production by bronchoalveolar lavage fluid (BALF) cells and PBL in 109 patients with sarcoidosis, idiopathic pulmonary fibrosis (IPF), lung cancer, and rheumatoid lung disease as well as 26 normal control individuals. Production of HERV-E 4-1 Env protein by alveolar macrophages was observed using indirect immunofluorescence in 3 IPF patients and 3 sarcoidosis patients (6/135). No peripheral blood lymphocytes showed HERV-E 4-1 Env protein production. Antibodies to HERV-E 4-1 Env protein were detected in the BALF of all six patients by immunoblot analysis, while none of the normal control individuals showed HERV-E 4-1 Env protein antibody in the BALF. All examined BALF cells showed HERV-E 4-1 env mRNA transcript expression by reverse transcription-polymerase chain reaction. No significant influence of point mutation or DNA polymorphism on HERV-E 4-1 Env protein production was recognized. In conclusion, local production of HERV-E 4-1 Env protein and defective tolerance of HERV gene products with resultant antibody production may contribute to the pathogenesis of IPF or sarcoidosis in some patients.