Recent studies have identified impaired type 2 alveolar epithelial cell (ATII) renewal in idiopathic pulmonary fibrosis (IPF) human organoids and severe fibrosis when ATII is defective in mice. ATIIs function as progenitor cells and require supportive signals from the surrounding mesenchymal cells. The mechanisms by which mesenchymal cells promote ATII progenitor functions in lung fibrosis are incompletely understood. We identified growth hormone receptor (GHR) is mainly expressed in mesenchymal cells, and its expression is substantially decreased in IPF lungs. Higher levels of GHR expression correlated with better lung function in patients with IPF. Profibrotic mesenchymal cells retarded ATII growth and were associated with suppressed vesicular GHR expression. Vesicles enriched with Ghr promote ATII proliferation and diminished pulmonary fibrosis in mesenchymal Ghr-deficient mice. Our findings demonstrate a previously unidentified mesenchymal paracrine signaling coordinated by GHR that is capable of supporting ATII progenitor cell renewal and limiting the severity of lung fibrosis.