Synchrotron x-ray diffraction experiment shows that the metal-insulator transition occurring in a ferromagnetic state of a hollandite K(2)Cr(8)O(16) is accompanied by a structural distortion from the tetragonal I4/m to monoclinic P112(1)/a phase with a √2×√2×1 supercell. Detailed electronic structure calculations demonstrate that the metal-insulator transition is caused by a Peierls instability in the quasi-one-dimensional column structure made of four coupled Cr-O chains running in the c direction, leading to the formation of tetramers of Cr ions below the transition temperature. This provides a rare example of the Peierls transition of fully spin-polarized electron systems.