Aging is the main risk factor for the development of idiopathic pulmonary fibrosis (IPF), a progressive and usually lethal lung disorder. Although the pathogenic mechanisms are uncertain, endoplasmic reticulum (ER) stress and impaired proteostasis that have been linked with aging are strongly associated with the pathogenesis of IPF. Using the Atg4b-deficient mice as a model, that partially reproduces the autophagy deficient conditions reported in aging and IPF lungs, we show for the first time how autophagy impairment and ER stress induction, contribute simultaneously to development of lung fibrosis in vivo. Increased expression of ER stress markers, inflammation and apoptosis of alveolar epithelial cells were observed in Atg4b-deficient mice compared to WT mice, when treated with the ER stress inducer tunicamycin. After tunicamycin treatment, Atg4b null lungs showed accumulation of its substrate LC3-I, demonstrating that these mice failed to induce autophagy despite the ER stress conditions. We also showed that compromised autophagy in lungs from Atg4b null mice is associated with exacerbated lung damage, epithelial apoptosis and the development of lung fibrosis at 21 days after tunicamycin treatment. Our findings indicate that ATG4B protein and autophagy are essential to mitigate ER stress and to prevent tunicamycin-induced epithelial apoptosis and lung fibrosis.