Reported is an instance of bronchiolitis obliterans due to the accumulation of lipid-laden cells within bronchiolar walls and lumina. The bronchiolar lining had extensive squamous and goblet cell metaplasia with focal ulceration. Scattered foci of cholesterol pneumonia, composed of acicular crystals with an associated foamy lipid material and type II alveolar epithelial cell hyperplasia, were present. The patient had no history related to this unusual pulmonary disease, although preoperatively her serum cholesterol level was mildly elevated. She was treated with pulmonary and cardiac allotransplantation.