Fungal pathogens are notorious for causing chronic and latent infections, but the mechanism by which they evade the immune response is poorly understood. A major limitation in the study of chronic fungal infection has been the lack of suitable animal models where the infection is controlled and yet persists. Pulmonary Cryptococcus neoformans infection in rats results in a diffuse pneumonitis that resolves without dissemination or scarring except for the persistence of interstitial and subpleural granulomas that harbor viable cryptococci inside macrophages and epithelioid cells. Infected rats are asymptomatic but remain infected for as long as 18 months after inoculation with C. neoformans. Containment of infection is associated with granuloma formation that can be partially abrogated by glucocorticoid administration. Using this model, we identified several features associated with persistent infection in the rat lung, including (i) localization of C. neoformans to discrete, well-organized granulomas; (ii) intracellular persistence ofC. neoformans within macrophages and epithelioid cells; (iii) reduced inducible nitric oxide synthase expression by granulomas harboring C. neoformans; and (iv) reduced antibody responses to cryptococcal polysaccharide. The results show that maintenance of persistent infection is associated with downregulation of both cellular and humoral immune responses.