Background: Severe primary graft dysfunction (PGD) is associated with poor early outcomes after lung transplantation (LTx). Less is known about lingering effects of severe PGD on pulmonary function. The study's aim was to determine whether development of severe primary graft dysfunction in the perioperative period was associated with reduced long term rates of survival or with diminished long term pulmonary function. Methods: A retrospective review was performed on LTx recipients who received their transplant during the period from 1992 through 2005. PGD severity over the first 48 hours post-transplant was graded using International Society for Heart Lung Transplantation criteria. Pulmonary function was evaluated yearly, and bronchiolitis obliterans syndrome (BOS) was determined from measurements of forced expiratory volume in 1 second (FEV1). Results: A total of 374 patients survived at least 90 days post-transplant. Overall survival rates were worse in patients with Grade 3 PGD: 51% at 5 years and 11% at 10 years for patients with Grade 3 PGD; 64% at 5 years and 35% at 10 years for those with Grade 2 PGD; and 66% at 5 years and 38% at 10 years for Grade 0 to 1 PGD (p = 0.001). BOS-free survival rate for patients with Grade 3 PGD was lower compared to those with Grade 0 to 2 for bilateral lung recipients, but not for single-lung recipients. Bilateral lung recipients who developed Grade 3 PGD had a significantly worse mean FEV1 than those who did not. For single-lung recipients, PGD grade did not correlate with post-transplant pulmonary function. Conclusions: Development of Grade 3 PGD in the early post-operative period negatively affects long-term survival, BOS-free survival and pulmonary function of bilateral lung transplant recipients who survive the peri-operative period.