Three cases of an unusual neoplasm of the lung appeared as solitary, peripheral pulmonary nodules in asymptomatic patients. These well-circumscribed neoplasms were composed of distinctive papillae covered by uniform cuboidal to columnar cells; more solid areas often were present. Ciliated cells, epithelial mucin, and necrosis were not observed, and mitotic activity was absent. Terminal tight junctions and microvilli were present in the two cases studied ultrastructurally. One specimen contained lamellar bodies and apical cytoplasmic dense bodies. Another case stained positively for a Clara cell-specific antigen, although surfactant apoprotein was not detected by immunostaining in the three cases. All patients have been free of disease (at 11 to 108 months). Papillary adenoma is an uncommon, apparently benign, and morphologically distinctive neoplasm. The immunohistochemical and ultrastructural findings hint at an origin from type II pneumocytes or Clara cells.