Obliterative bronchiolitis is the primary noninfectious pulmonary complication after allogeneic hematopoietic cell transplantation and the only pathognomonic manifestation of pulmonary chronic graft-versus-host disease (cGVHD). In our recent study, we identified a novel effect of IL-26, which is absent in rodents, on transplant related-obliterative bronchiolitis. Sublethally irradiated NOD/Shi-scidIL2rγnull mice transplanted with human umbilical cord blood gradually exhibited obliterative bronchiolitis with increased collagen deposition and predominant infiltration with human IL-26+CD26+CD4 T cells. Moreover, we showed that IL-26 increased collagen synthesis in fibroblasts in vitro and that collagen contents were increased in a murine GVHD model using IL26 transgenic mice. In vitro analysis demonstrated a significant increase in IL-26 production by CD4 T cells following CD26 costimulation, while immunoglobulin Fc domain fused with the N-terminal of caveolin-1, the ligand for CD26, (Cav-Ig) effectively inhibited production of IL-26. Administration of Cav-Ig before or after onset of GVHD impeded the development of clinical and histologic features of GVHD without interrupting engraftment of donor-derived human cells, with preservation of the graft-versus-leukemia effect. We concluded that cGVHD of the lungs is caused in part by IL-26+CD26+CD4 T cells, and that treatment with Cav-Ig could be beneficial for cGVHD prevention and therapy.