The nomenclature of diffuse parenchymal lung disease (also known as interstitial lung disease) has caused a great deal of confusion, with use of complicated histopathological terms not always corresponding to clinico-radiological entities. Five major groupings are now recognized: idiopathic interstitial pneumonias; diseases associated with systemic conditions, including rheumatological disorders; diseases caused by environmental triggers or drugs; granulomatous diseases; and other diffuse lung diseases. Classification is based on recognition of clinical, radiological, and histopathological patterns, as opposed to the purely histopathological terminology. Diagnosis is complicated by the large number of disorders grouped within the diffuse parenchymal lung diseases. A systematic diagnostic algorithm, based upon careful clinical evaluation and a logical sequence of tests, is essential. Clinical history, clinical examination, chest radiography, pulmonary function tests, and selective blood tests should be followed by high-resolution CT, bronchoalveolar lavage (in some cases), and lung biopsy (in a few cases).