To study the effects of anesthesia on respiratory function of the neonate, the authors investigated the effect of breathing 100% oxygen and of breathing oxygen plus 0.75 MAC halothane on functional residual capacity, lung and airway resistance, expired minute volume, work of breathing, lung compliance, and blood gases andpH in nine 5–8-day-old, 4.6–7.7-kg lambs. Breathing 100% oxygen increased PaO2but had no effect on PaCO2, minute ventilation, or lung mechanics. Three-fourths MAC halothane depressed minute ventilation 34% ± 13% (P< 0.05) and increased PaCO250% ± 5% (P< 0.05). Lung and airway resistance increased 59% ± 26% (P< 0.05); work of breathing decreased (P< 0.05); and lung compliance was unchanged. Functional residual capacity was reduced 32% ± 6% (P< 0.05), which may be due to loss of diaphragm and intercostal muscle function and to an inability to take deep breaths. The authors conclude that 0.75 MAC halothane significantly impairs the pulmonary function of lambs who breathe spontaneously. Similar changes in human infants could account for the hypoxemia and hypercarbia that often are seen during anesthesia.