The activity of the secreted phosphodiesterase autotaxin produces the inflammatory signaling molecule LPA and has been associated with a number of human diseases including idiopathic pulmonary fibrosis (IPF). We screened a single DNA-encoded chemical library (DECL) of 225 million compounds and identified a series of potent inhibitors. Optimization of this series led to the discovery of compound 1 (X-165), a highly potent, selective, and bioavailable small molecule. Cocrystallization of compound 1 with human autotaxin demonstrated that it has a novel binding mode occupying both the hydrophobic pocket and a channel near the autotaxin active site. Compound 1 inhibited the production of LPA in human and mouse plasma at nanomolar levels and showed efficacy in a mouse model of human lung fibrosis. After successfully completing IND-enabling studies, compound 1 was approved by the FDA for a Phase I clinical trial. These results demonstrate that DECL hits can be readily optimized into clinical candidates.