Forkhead box protein O3 (FOXO3) has good inhibition ability toward fibroblast activation and extracellular matrix, especially for the treatment of idiopathic pulmonary fibrosis. How FOXO3 regulates pulmonary fibrosis remains unclear. In this study, we reported that FOXO3 had binding sequences with F-spondin 1 (SPON1) promoter, which can activate its transcription and selectively promote the expression of SPON1 circRNA (circSPON1) but not mRNA expression. We further demonstrated that circSPON1 was involved in the extracellular matrix deposition of HFL1. In the cytoplasm, circSPON1 directly interacted with TGF-β1-induced Smad3 and inhibited the activation of fibroblasts by inhibiting nuclear translocation. Moreover, circSPON1 bound to miR-942-5p and miR-520f-3p that interfered with Smad7 mRNA and promoted Smad7 expression. This study revealed the mechanism of FOXO3-regulated circSPON1 in the development of pulmonary fibrosis. Potential therapeutic targets and new insights into the diagnosis and treatment of idiopathic pulmonary fibrosis based on circRNA were also provided.