Pulmonary neuroendocrine cell (PNEC) hyperplasia typically occurs as an adaptive response in persons living at high altitudes and as a reactive response in the setting of lung injury. However, previous studies suggest that PNEC hyperplasia can occur in the absence of preexisting lung disease and may even give rise to airway disease through the development of pulmonary tumorlets and airway fibrosis and perhaps the release of paracrine secretions. We describe a patient with diffuse PNEC proliferation of a probable hyperplastic nature developing in the absence of a chronic pulmonary disorder who presented clinically with an interstitial lung process. Open lung biopsy displayed a florid intraepithelial population of PNEC diffusely involving the distal airways and alveoli with desquamation and filling of alveolar spaces by nests of PNEC. The presence of alveolar thickening was attributable to the intraepithelial proliferation of PNEC associated with interstitial fibrosis and accounted for mild reductions in the pulmonary diffusing capacity. The neuroendocrine differentiation of this proliferation was evident by light microscopic and ultrastructural examination. The absence of airway fibrosis and pulmonary tumorlets was in agreement with the lack of clinical airway disease in this case. The intraepithelial growth and absence of parenchymal invasion in this lesion favor a diffuse, florid PNEC hyperplasia with mild dysplastic features over a pulmonary neuroendocrine neoplasm.