Summary An evidently infectious disease which seems to have been newly introduced into Iceland is causing very heavy losses among sheep. During the course of about one and a half years it usually causes the loss of about 50 per cent. of an affected flock. This disease runs a very chronic course, and has an incubation period of six to eight months, or even more. The chief clinical symptoms are respiratory distress, bronchial râles, nasal flow of mucous, frothy, watery exudate in the bronchi, but no fever. The histological picture is very distinct, consisting of epithelial proliferations forming papillary adenomatous tissue, and a more or less prorzounced exudation of mononuclear cells into the alveoli. The histological picture corresponds very closely to that of jaagsiekte and M'Fadyean's “verminous pneumonia,” also in a certain degree to Cowdry's progressive pneumonia of sheep. Transmission has been easily affected by housing sheep together, but intrapulmonary inoculation was only successful in transmitting the disease once out of three attempts made. Up to the present the disease has not been transmitted by the injection of bacteria-free filtrates, but no microorganism has been found which can reasonably be regarded as the causative agent. The possibility of its cause being due to the presence of parasitic lungworms appears to have been eliminated.