The present invention relates to methods and compositions for prevention of graft rejection in lung transplant recipients and for treatment of subjects with pulmonary disorders. Specifically, the methods and compositions of the invention provide a means for inhibiting immune response mediated inflammatory processes in the lungs. The method of the invention comprises the administration of aerosolized cyclosporine for prevention of acute and/or chronic refractory rejection in lung transplant patients. The invention further provides for the use of aerosolized cyclosporine to treat subjects having immunologically mediated inflammatory pulmonary disorders including, but not limited to, asthma, cystic fibrosis, idiopathic pulmonary fibrosis, chronic bronchitis and allergic rhinitis. The present invention, by enabling a method for the use of aerosolized cyclosporine for inhibiting pulmonary inflammation leading to prevention of graft rejection and treatment of pulmonary disorders, provides a safer and less toxic treatment than those methods that utilize systemic administration of cyclosporine.