Pseudomonas aeruginosa is an uncommon cause of community-acquired pneumonia (CAP), but a common cause of hospital-acquired pneumonia. Controversies exist for diagnostic methods and antibiotic therapy. We review the epidemiology of CAP, including that in patients with HIV and also in hospital-acquired pneumonia, including ventilator-associated pneumonia (VAP) and bronchoscope-associated pneumonia. We performed a literature review of clinical studies involving P aeruginosa pneumonia with an emphasis on treatment and prevention. Pneumonia due to P aeruginosa occurs in several distinct syndromes: (1) CAP, usually in patients with chronic lung disease; (2) hospital-acquired pneumonia, usually occurring in the ICU; and (3) bacteremic P aeruginosa pneumonia, usually in the neutropenic host. Radiologic manifestations are nonspecific. Colonization with P aeruginosa in COPD and in hospitalized patients is a well established phenomenon such that treatment based on respiratory tract cultures may lead to overtreatment. We present circumstantial evidence that the incidence of P aeruginosa has been overestimated for hospital-acquired pneumonia and reflex administration of empirical antipseudomonal antibiotic therapy may be unnecessary. A diagnostic approach with BAL and protected specimen brush using quantitative cultures for patients with VAP led to a decrease in broad-spectrum antibiotic use and improved outcome. Endotracheal aspirate cultures with quantitative counts are commonly used, but validation is lacking. An empirical approach using the Clinical Pulmonary Infection Score is a pragmatic approach that minimizes antibiotic resistance and leads to decreased mortality in patients in the ICU. The source of the P aeruginosa may be endogenous (from respiratory or GI tract colonization) or exogenous from tap water in hospital-acquired pneumonia. The latter source is amenable to preventive measures.