A 55-year-old man was treated with gefitinib for disseminated pleural lesions, 1 year after resection of the left lower lobe for non-small cell lung cancer. After 6 weeks of continuous daily treatment with oral gefitinib, he developed dyspnoea on exertion and a non-productive cough. CXR and CT revealed focal areas of ground-glass opacity (GGO) in the right upper lobe. Despite gefitinib being discontinued, high-resolution CT revealed extension of GGO and restructuring of lung parenchyma, suggesting acute interstitial pneumonia. Transbronchial biopsy revealed acute-phase diffuse alveolar damage. After administration of methylprednisolone pulse therapy (1 g/day intravenously) for three consecutive days, the areas of GGO shrank on high-resolution CT and symptoms resolved. Diffuse alveolar damage caused by gefitinib can be successfully treated in the early phase with high-dose corticosteroids. Patients receiving gefitinib should be carefully examined for symptoms and undergo CT if their condition deteriorates.