Background Guidelines for the diagnosis and grading of lymphocytic bronchiolitis (LB) have been available for more than a decade, but agreement is lacking concerning the clinical implications of this histologic finding. Objectives Study goals were to describe the overall prevalence and incidence of LB in a consecutive cohort of lung transplant recipients and identify risk factors for the onset, frequency, and severity of LB. Methods A retrospective analysis was done of 2,697 transbronchial biopsy (TBB) specimens obtained during the first 2 years after transplantation from 299 consecutive patients who underwent transplantation between 1996 and 2006. Results Full diameter membranous bronchioli were missing in approximately 30% of TBB specimens. The proportion of patients demonstrating LB remained constant during follow-up (trend test, p = 0.2). The cumulative incidence of LB (≥B2) was 33%, 53%, 62%, and 68% at 1-, 3-, 6-, and 12-months, respectively. Approximately one-quarter and one-half of the patients had a second episode of ≥B2 within 3 months and 2-years of transplantation, respectively. Exposure to LB during the first 2 years after transplantation was independently associated with the frequency and/or severity of acute cellular rejection ( p < 0.0001). The choice between anti-thymocyte globulin or daclizumab induction did not alter the overall frequency and/or severity of LB ( p = 0.7). LB grade B2 or higher was associated with increased histologic bronchiolitis obliterans (odds ratio, 3.3, 95% confidence interval, 1.5–6.9, p = 0.001). Conclusions The frequency and severity of LB was associated with the occurrence and severity of acute cellular rejection.