Lung cancer and chronic obstructive pulmonary disease (COPD) are closely linked diseases. In Xuanwei, China, the extremely high incidence and mortality rates of lung cancer and COPD are associated with exposure to household smoky coal burning. Previous studies found that telomere length was related to lung disease. The objective of this study is to investigate the relationship of peripheral blood leukocyte telomere length to both lung cancer and COPD, as well as indoor coal smoke exposure in Xuanwei. We measured telomere length using quantitative polymerase chain reaction (qPCR) in peripheral blood leukocytes of 216 lung cancer patients, 296 COPD patients, and 426 healthy controls from Xuanwei. The telomere length ratios (mean ± SD) in patients with lung cancer (0.76 ± 0.35) and COPD (0.81 ± 0.35) were significantly shorter than in that of controls (0.95 ± 0.39). Individuals with the shortest tertile telomere length had 3.90- and 4.54-fold increased risks of lung cancer and COPD, respectively, compared with individuals with the longest tertile telomere length. No correlation was found between telomere length and pack-years of smoking. In healthy subjects, coal smoke exposure level affected telomere length. Lung function was positively and negatively associated with telomere length and environmental exposure, respectively, when combination the control and COPD groups. The result suggests that shortened telomere length in peripheral blood leukocytes was associated with lung cancer and COPD and might be affected by coal smoke exposure level in Xuanwei. Whether variation in telomere length caused by environmental exposure has a role in lung cancer and COPD development and exacerbation needs further research.