Twenty-eight children with homozygous beta-thalassemia who were receiving regular hypertransfusion and desferrioxamine chelation therapy were included in this study aiming at determination of the pulmonary function abnormalities in this population. Their mean age was 10.9 yr. Hypoxemia was found in 10 patients with a significant inverse correlation with both iron overload and desferrioxamine ratio (DFO). Reduced TLC was the predominant abnormality, found in 19 of 28 patients (68%). Out of these 19 patients, fourteen (74%) had a moderate (58%) and severe (16%) reduction in TLC. CT scan of the lungs in the 3 patients with severe reduction in TLC did not show any evidence of pulmonary fibrosis. FEV1 and FEF(25–75%) were less than the predicted values in 28% and 14% of our patients respectively but no patients had pure obstructive disease as all had reduced TLC while FEV1/FVC ratio was normal in all but one patient who had also abnormally high RV/TLC ratio which is indicative of severe mixed restrictive-obstructive lung disease. TLC, FVC, FEV1, and FEF(25–75%) were inversely correlated with age, iron burden, and DFO ratio. The restrictive lung disease becomes more severe with increasing the duration and degree of iron overload. We conclude that restrictive lung disease is the more prevalent abnormality of pulmonary functions. Iron plays a central role in the pathogenesis of this disease.