Previous studies have reported that patients with idiopathic pulmonary fibrosis occasionally develop lung cancer (LC). However, in connective tissue disease (CTD)-related interstitial lung disease (ILD), there are few data regarding the LC development. The aim of the present study was to evaluate the clinical significance of LC development in patients with CTD-ILD. A retrospective review of our database of 562 patients with ILD between 2000 and 2014 identified 127 patients diagnosed with CTD-ILD. The overall and cumulative incidences of LC were calculated. In addition, the risk factors and prognostic impact of LC development were evaluated. The median age at the ILD diagnosis was 63 years (range 37-84 years), and 73 patients (57.5%) were female. The median follow-up period from the ILD diagnosis was 67.4 months (range 10.4-322.1 months). During the period, 7 out of the 127 patients developed LC (overall incidence 5.5%). The cumulative incidences at 1, 3, and 5 years were 0.0%, 1.8%, and 2.9%, respectively. The risk of LC development was significantly higher in patients with higher smoking pack-year (odds ratio [OR] 1.028; 95% confidence interval [CI] 1.008-1.049; P=0.007) and emphysema on chest high-resolution computed tomography (OR 14.667; 95% CI 2.871-74.926; P=0.001). The median overall survival time after developing LC was 7.0 months (95% CI 4.9-9.1 months), and the most common cause of death was LC, not ILD. According to the Cox proportional hazard model analysis with time-dependent covariates, patients who developed LC showed significantly poorer prognosis than those who did not (hazard ratio 87.86; 95% CI 19.56-394.67; P<0.001). In CTD-ILD, clinicians should be careful with the risk of LC development in patients with a heavy smoking history and subsequent emphysema. Although not so frequent, the complication could be a poor prognostic determinant.