The effects of 0.5 and 1.5 per cent (end-tidal) halothane on the pulmonary circulation in the anesthetized dog were studied by measurement of left atrial pressure, pulmonary arterial pressure, and total pulmonary blood flow. Halothane, 1.5 per cent, decreased pulmonary arterial pressure and flow, while computed pulmonary vascular resistance remained unchanged. In order to establish whether halothane has a direct effect on the pulmonary vascular bed, the left diaphragmatic lobe was isolated from the pulmonary circulation and perfused at a constant rate with blood from an external oxygenating circuit. When halothane was added to the external circuit a sustained decrease in perfusion pressure occurred, indicating that pulmonary vascular resistance had decreased. In the same experiments when halothane was administered to the dog by inhalation no change in perfusion pressure occurred in the lobe. Thus, by a direct action on pulmonary vascular smooth muscle, halothane is capable of producing vasodilatation, which is masked in the intact animal by the decrease in pulmonary arterial pressure and/or the action of a circulating vasoconstrictor substance.