Scleroderma currently affects approximately 75,000–100,000 individuals in the United States. Fibroblasts isolated from lesional skin of scleroderma patients overexpress collagens and other matrix components, and this abnormality is maintained for multiple passages in culture. To understand the molecular basis for matrix gene overexpression, we performed a differential display comparison of fibroblasts from clinically lesional and nonlesional scleroderma skin. The results suggested that protease nexin 1 (PN1), a protease inhibitor, is overexpressed in scleroderma fibroblasts. Northern blot verification showed that lesional and nonlesional scleroderma fibroblasts had three- to five-fold increased levels of PN1 mRNA compared with healthy fibroblasts. Western analysis showed that scleroderma fibroblasts also secreted more PN1. In situ hybridization of skin biopsy specimens demonstrated PN1 expression in the dermis of four out of six scleroderma patients but no PN1 expression in the dermis of six healthy volunteers. Transient or stable overexpression of PN1 in mouse 3T3 fibroblasts increased collagen promoter activity or endogenous collagen transcript levels, respectively. PN1 mutagenized at its active site and antisense PN1 both failed to increase collagen promoter activity. These results suggest that overexpression of enzymatically active PN1 may play a pathogenic role in the development of the scleroderma phenotype.