Recent evidence suggests a role for lung microbiome in the occurrence of bronchiolitis obliterates syndrome (BOS) in lung transplant recipients (LTR); however the mechanism is unclear. In this study, we hypothesized that changes in diversity and/or abundance of the lung microbiome modulate host immune responses and contribute to activation of myeloid derived regulatory cells (MDRCs) leading to BOS. BAL samples from 10 adult LTR were collected. Six serial fractions of BAL return were collected and labeled BAL 1(proximal airway) thru BAL 6 (distal airway). Oral wash (OW) and nasal swabs (N) were collected. 16S rDNA genes were amplified using V4 primers and PCR products sequenced for microbiome analysis. MDRC subsets were enumerated from BAL using multi-parameter flow cytometry. Alpha diversity (Shannon index -SI) was found to be significantly higher in BAL1 (mean SI= 6.6), BAL6 (average SI =6.8) and N (average SI=6.3) as compared to OW (SI=3.6) (p<0.0001). Beta-diversity between (unifrac-weighted distance) was significantly greater between OW microbiome and BAL1, BAL6 and N microbiome (p<0.001). N microbiome was similar to both BAL1 and BAL6. Significant differences in microbiome of BAL1 and BAL6 were noted. BAL1 had a higher proportion of immunosuppressive MDRCs (CD14+HLA-DR−CD11b+CD16−CD66b− (A) and CD14−HLA-DR−CD11b+CD16+CD66b+(B)), while BAL6 had a significantly higher proportion of pro-inflammatory (CD163+HLA-DR+CD11b+CD16−CD66b−(C)) MDRCs (p<0.05). Correlation analysis revealed that in BAL1, phyla Actinobacteria had a significant positive correlation with MDRCs subsets B (p= 0.002) and C (p=0.02). Phyla Chlorobi was positively correlated with subset A (p=0.04) and phyla Planctomycetes (p= 0.02) and TM7 (p=0.04) were positively correlated with subset C. In comparison, in B6 only phyla TM7 had a significant positive correlation with subset B (p=0.003) and C (p=0.01). Additionally, the interaction between proportions of subset B and airway microbiome (B1/B6) was significant in predicting the total gram+ bacterial abundance (p=0.046). In LTR, nasal but not oral microbiome correlates with lung microbiome. There exist negative and positive correlation of certain bacteria with various MDSCs. An imbalance in the ratio of immunosuppressive and pro-inflammatory MDSCs may contribute to the pathogenesis of BOS.