Background: Primary graft dysfunction (PGD) in the immediate post-lung transplant period strongly increases the risk of chronic rejection (broncholitis obliterans syndrome). Here, we hypothesized that PGD-induced inflammation augments alloimmunity, thereby predisposing to broncholitis obliterans syndrome. Methods: Primary graft dysfunction and broncholitis obliterans syndrome were diagnosed according to the established International Society for Heart and Lung Transplantation criteria. Anti-human leukocyte antigen (HLA) alloantibodies were analyzed using Flow-PRA. Donor HLA class II-specific T cells were analyzed using interferon (IFN)-γ ELISPOT. Serum levels of 25 cytokines and chemokines were measured using LUMINEX. Results: Of the 127 subjects, 29 (22.8%) had no PGD (grade 0), 42 (33.2%) had PGD-1, 36 (28.3%) had PGD-2, and 20 (15.7%) had PGD-3. Patients with PGD grades 1 to 3 (PGD1-3) had elevated proinflammatory mediators MCP-1, IP-10, interleukin (IL)-1β, IL-2, IFN-γ, and IL-12 in the sera during the early posttransplant period compared with patients with PGD grade 0 (PGD0). On serial analysis, PGD1-3 patients revealed increased development of de novo anti-HLA-II (5 years: 52.2% versus PGD0 13.5%, p = 0.008). However, no difference was found in anti-HLA-I alloantibody development (PGD1-3 patients 48% versus PGD0 39.6%, p = 0.6). Furthermore, PGD1-3 patients had increased frequency of donor HLA class II-specific CD4+ T cells [(91.4 ± 19.37) × 10-6 versus (23.6 ± 15.93) × 10-6, p = 0.003]. Conclusions: Primary graft dysfunction induces proinflammatory cytokines that can upregulate donor HLA-II antigens on the allograft. Increased donor HLA-II expression along with PGD-induced allograft inflammation promotes the development of donor specific alloimmunity. This provides an important mechanistic link between early posttransplant lung allograft injury and reported association with broncholitis obliterans syndrome.