Idiopathic pulmonary fibrosis (IPF) is a life-threatening progressive lung disorder with limited therapeutic options. While interleukin-10 (IL-10) is a potent anti-inflammatory and anti-fibrotic cytokine, its utility in treating lung fibrosis has been limited by its short half-life. We describe an innovative hydrogel-based approach to deliver recombinant IL-10 to the lung for the prevention and reversal of pulmonary fibrosis in a mouse model of bleomycin-induced lung injury. Our studies show that a hyaluronan and heparin-based hydrogel system locally delivers IL-10 by capitalizing on the ability of heparin to reversibly bind IL-10 without bleeding or other complications. This formulation is significantly more effective than soluble IL-10 for both preventing and reducing collagen deposition in the lung parenchyma after 7 days of intratracheal administration. The anti-fibrotic effect of IL-10 in this system is dependent on suppression of TGF-β driven collagen production by lung fibroblasts and myofibroblasts. We conclude that hydrogel-based delivery of IL-10 to the lung is a promising therapy for fibrotic lung disorders.