A case of xanthomatous inflammatory pseudotumor of the lung is reported. Large lipid-laden macrophages were the most prominent microscopic feature of thelesion. Within the lung parenchyma three possible sources of alveolar lipids are serum lipids that pass into the alveolar spaces after injury to alveolar capillary walls, lipoproteins secreted by type 2 alveolar epithelial cells, and lipoproteins formed within alveolar macrophages. Phagocytosis and retention of such lipids by alveolar macrophages are proposed as important factors in the pathogenesis of the xanthomatous inflammatory pseudotumor of the lung.