Alveolar macrophages (AMs) are critical for lung immune defense and homeostasis. They are orchestrators of chronic obstructive pulmonary disease (COPD), with their number significantly increased and functions altered in COPD. However, it is unclear how AM number and function are controlled in a healthy lung and if changes in AMs without environmental assault are sufficient to trigger lung inflammation and COPD. We report here that absence of isthmin 1 (ISM1) in mice ( ) leads to increase in both AM number and functional heterogeneity, with enduring lung inflammation, progressive emphysema, and significant lung function decline, phenotypes similar to human COPD. We reveal that ISM1 is a lung resident anti-inflammatory protein that selectively triggers the apoptosis of AMs that harbor high levels of its receptor cell-surface GRP78 (csGRP78). csGRP78 is present at a heterogeneous level in the AMs of a healthy lung, but csGRP78 AMs are expanded in mice, cigarette smoke (CS)-induced COPD mice, and human COPD lung, making these cells the prime targets of ISM1-mediated apoptosis. We show that csGRP78 AMs mostly express MMP-12, hence proinflammatory. Intratracheal delivery of recombinant ISM1 (rISM1) depleted csGRP78 AMs in both and CS-induced COPD mice, blocked emphysema development, and preserved lung function. Consistently, ISM1 expression in human lungs positively correlates with AM apoptosis, suggesting similar function of ISM1-csGRP78 in human lungs. Our findings reveal that AM apoptosis regulation is an important physiological mechanism for maintaining lung homeostasis and demonstrate the potential of pulmonary-delivered rISM1 to target csGRP78 as a therapeutic strategy for COPD.