We have created a model of chronic hypoxemia in the newborn lamb by decreasing pulmonary blood flow in the presence of an atrial septal defect. Via a left lateral thoracotomy, we place an inflatable balloon around the pulmonary artery and perform an atrial septostomy under direct vision. We also insert several vascular catheters and place an electromagnetic flow transducer around the ascending aorta. Three days after surgery, we inflated the balloon in 11 lambs such that arterial oxygen saturation decreased to 60 to 75%. Studies were performed on these lambs twice weekly and weekly on 12 normoxemic lambs. Growth decreased sharply (47 ± 123versus221 ± 82 g/ day) at the onset of hypoxemia and remained low, although oxygen consumption followed the normal gradual decline. Heart rate remained elevated throughout the study. Arterial Pco2levels decreased from 40 ± 5 to 35 ± 7 torr and remained low. Systemic blood flow decreased at balloon inflation but quickly returned to normal. Mixed venous saturation was low, but could decrease further with shivering. Systemic oxygen delivery decreased initially but returned to normal as Hb concentration rose (from 9.4 ± 1.5 to 12.5 ± 2.2 g/dl). P50 increased normally over the study period. Four of the 11 hypoxemic lambs died during the study. These data show that, in the chronically hypoxemic newborn, systemic oxygen delivery is maintained primarily by a rising Hb. Total body oxygen consumption is maintained at rest but is redistributed away from anabolic requirements and toward cardiorespiratory work. This signal to decrease growth occurs despite less than maximal oxygen extraction at rest.