We report a case of acute interstitial pneumonitis causing severe shortness of breath and hypoxemia from the use of thalidomide for treatment of multiple myeloma. It is known that thalidomide can increase the risk of thromboembolic events, such as deep venous thrombosis and pulmonary embolism, but there has only been one reported case of thalidomide alone causing interstitial pneumonitis. Our case is unusual in that our patient was on the thalidomide/dexamethasone protocol for multiple myeloma. Although our patient’s chemotherapy protocol included concurrent dexamethasone, his symptoms and imaging findings, did not show improvement until the thalidomide was discontinued. Thalidomide induced pulmonary toxicity should be considered in multiple myeloma patients who present with acute shortness of breath.