Niemann–Pick disease type C2 (NPC2) is caused by the inherited deficiency of a lysosomal cholesterol transport protein, NPC2 protein. Many cases of NPC2 present in early infancy with inflammatory lung disease, with subsequent severe neurological disease and death in early childhood. This disease is theoretically correctable by bone marrow transplantation (BMT), as the NPC2 protein is small and soluble and secreted and recaptured by the mannose‐6‐phosphate pathway. In this report we describe the first successful allogeneic bone marrow transplantation for this condition in a 16‐month‐old boy homozygous for the NPC2 p.E20X mutation, which has hitherto been reported to cause disease with a severe phenotype. During BMT there was an initial improvement of the established respiratory illness, with the immune suppression associated with transplant conditioning, but there was subsequent marked deterioration at the time of immune reconstitution and donor cell engraftment. This ‘graft versus substrate’ reaction was managed with intensive immune suppressant therapy, and it gradually resolved as the substrate was cleared by the engrafted donor macrophages. All immune suppression was withdrawn 18 months after transplantation, and his respiratory illness has resolved. He walked independently at 24 months and is continuing to reach developmental milestones after receiving his transplant. We conclude that the successful treatment of Niemann–Pick C2 therefore seems likely to be associated with a severe post‐transplantation ‘graft versus substrate’ reaction that requires intense immune suppression before eventual resolution.