Etanercept is the first anticytokine drug approved to treat rheumatoid arthritis. Side effects are infrequent, the most common being local skin reactions, headaches, and upper respiratory tract symptoms. We report the first case of lung injury that occurred while receiving this agent. Biopsy specimens of lung and skin lesions demonstrated noncaseating granulomas associated with a microscopic particulate. Withdrawal of etanercept achieved clinical stabilization, and the addition of prednisone resulted in rapid improvement.