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 $sqrt{2}timessqrt{2}times 1$ 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 furnishes a rare example of the Peierls transition of fully spin-polarized electron systems.
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