Five children with positive serology for human immunodeficiency virus (HIV) infection by enzyme-linked immunosorbent assay and Western blot were followed for chronic pulmonary disease. Lung biopsies were performed in all patients, and confirmed the diagnosis of pulmonary lymphoid hyperplasia. All children demonstrated progressive hypoxia and increasing alveolar capillary oxygen gradients over at least 1 year of follow-up. All children were on periodic intravenous gamma globulin treatment for a B-cell defect prior to the initiation of corticosteroid therapy. Prednisone was initially given at a dose of 2 mg/kg daily and was subsequently tapered to an alternate day regimen. All children showed improvement in oxygenation. No deterioration in immune function was noted, and there was no increase in bacterial infection. This study indicates that corticosteroids can successfully reverse the severe hypoxia that may result from pulmonary lymphoid hyperplasia in pediatric AIDS patients.