Primary graft dysfunction (PGD) is a major risk factor for chronic lung allograft dysfunction (CLAD) following lung transplantation, but the mechanisms linking these pathologies are poorly understood. We hypothesized that the replicative stress induced by PGD would lead to erosion of telomeres, and that this telomere dysfunction could potentiate CLAD. In a longitudinal cohort of 72 lung transplant recipients with >6 years median follow-up time, we assessed tissue telomere length, PGD grade, and freedom from CLAD. Epithelial telomere length and fibrosis-associated gene expression were assessed on endobronchial biopsies taken at 2 - 4 weeks post-transplant by TeloFISH assay and nanoString digital RNA counting. Negative-binomial mixed-effects and Cox-proportional hazards models accounted for TeloFISH staining batch effects and subject characteristics including donor age. Increasing grade of PGD severity was associated with shorter airway epithelial telomere lengths (P = 0.01). Transcriptomic analysis of fibrosis-associated genes showed alteration in fibrotic pathways in airway tissue recovering from PGD, while telomere dysfunction was associated with inflammation and impaired remodeling. Shorter tissue telomere length was in turn associated with increased CLAD risk, with a hazard ratio of 1.89 (95% CI 1.16 - 3.06) per standard deviation decrease in airway telomere length, after adjusting for subject characteristics. PGD may accelerate telomere dysfunction, potentiating immune responses and dysregulated repair. Epithelial cell telomere dysfunction may represent one of several mechanisms linking PGD to CLAD.