A nonsmoking 54-yr-old man, employed in a peat moss packaging plant, developed dyspnea and recurrent fever. The diagnosis of hypersensitivity pneumonitis (HP) was made. Thirteen of 14 coworkers and 13 nonexposed control subjects were studied. Five workers were nonsmokers, two were minimal smokers, and six were smokers. HP was found in another subject. Monocillium sp. and Penicillium citreonigrum, 4.6 x 10(7) CFU/g, were found in the peat moss. Three nonsmokers, the two minimal smokers (including the subject with HP), and the index case had antibodies to these microorganisms; none of the six heavy smokers had antibodies. Serum TNF-alpha was higher in the workers than in the control subjects (0.930 +/- 0.177 versus 0. 350 +/- 0.076). Three of the four asymptomatic seropositive workers and two seronegative smokers were further evaluated. All three seropositive workers had normal lung functions and CT but they all had a lymphocytic alveolitis (30, 34, and 68% lymphocytes in their bronchoalveolar lavage [BAL]). The smokers had normal lung functions, CT, and percentage of BAL lymphocytes (3 and 13%). This study identified a previously unrecognized work environment that can lead to HP and documented a protective effect of smoking on the response to antigens.