Subacute lung disease, manifested as either obstructive (OLD) or restrictive (RLD) lung dysfunction, is a common complication following allogeneic stem cell transplantation. In each case, therapeutic options are limited, morbidity remains high, and long-term survival is poor. Between 2001 and 2008, 34 patients with noninfectious, obstructive (25) or RLD restrictive lung dysfunction (nine) received etanercept (Enbrel®, Amgen Inc.) 0.4 mg/kg/dose, subcutaneously, twice weekly, for 4 (group A) or 12 weeks (group B). Corticosteroids (if present at study entry) were kept constant for the initial 4 weeks of therapy and then tapered as tolerated. Thirty-one of 34 (91%) subjects were evaluable for response, and 10 (32%) met primary response criteria. There was no difference in response based on the duration of treatment (29% group A versus 35% group B; P =.99), the presence of RLD or OLD (33% versus 32%; P =.73), or the severity of pulmonary disease at study onset. Estimated 5-year overall survival rates following therapy were 61% (95% confidence interval, 46%–80%) for all subjects and 90% (95% confidence level, 73% –100%) for the 10 who met the primary response criteria. Five-year survival estimates for subjects treated with RLD was 44%, compared with 67% for those treated for OLD (P =.19). Etanercept was well tolerated, with no bacteremia or viremia observed. Pathogens were noted on posttherapy bronchoalveolar lavage in two cases. These data support the development of expanded clinical trials to study etanercept as a therapeutic agent for subacute lung injury after allogeneic stem cell transplantation.