Background: Some but not all previous studies report that pneumonia in children aged less than five years is associated with lower lung function and elevated risk of respiratory disease. To date, none have explored these associations in at-risk populations such as First Nations Australians, whose incidence of early childhood pneumonia is among the highest reported in the world. Methods: This cross-sectional study included 1276 First Nations Australian children/young adults aged 5–25 years recruited from regional/remote Queensland and Northern Territory communities and schools. Associations between pneumonia and both spirometry values and asthma were investigated using linear and logistic regression. Results: Early childhood pneumonia was associated with lower FEV1 and FVC Z-scores, but not FEV1/FVC% Z-scores, when occurring before age three (FEV1 β = −0.42, [95%CI −0.79, −0.04]; FVC β = −0.62, [95%CI −1.14, −0.09]), and between three and five years (β = −0.50, [95%CI −0.88, −0.12]; β = −0.63, [95%CI −1.17, −0.10]), compared to those who never had pneumonia. Similarly, pneumonia occurring when aged before age three years (OR = 3.68, 95%CI 1.96–6.93) and three to five years (OR = 4.81, 95%CI 1.46–15.8) was associated with increased risk of asthma in later childhood. Conclusions: Early childhood pneumonia is associated with lung function deficits and increased asthma risk in later childhood/early adulthood in First Nations Australians. The disproportionate impact of pneumonia on at-risk children must be addressed as a priority.