Chronic lung allograft dysfunction (CLAD) is the leading cause of mortality following lung transplantation. We conducted a retrospective cohort study including 397 bilateral lung recipients transplanted in from 1996 to 2009 to determine the association between ambient air pollution, CLAD and mortality. Pollution exposure was assessed using satellite‐based estimates of nitrogen dioxide, distance to major roadway and total length of roadways around a patient's home. Cumulative exposures to ozone and particulate matter were estimated from concentrations measured at fixed‐site stations near patients' homes using inverse distance weighted interpolation. Cox proportional hazards models were used to estimate the associations of CLAD with air pollution exposure, adjusting for various individual and neighborhood characteristics. During the follow‐up, 185 patients developed CLAD (47%) and 101 patients died (25%). Fifty‐four deaths (53%) were due to CLAD. We observed an association between CLAD development and road density within 200 m of a patient's home (HR 1.30 [95% CI 1.07–1.58]). Although based on a subgroup of 14 patients, living within 100 m of a highway was associated with a high risk for developing CLAD (HR 4.91 [95% CI 2.22, 10.87]). These data suggest that exposure to traffic‐related air pollution is associated with development of CLAD among lung transplant recipients.