Background Bronchopulmonary dysplasia (BPD), defined as protracted neonatal hypoxaemia, is considered a risk factor for respiratory disease in adulthood. The relationship between this diagnosis and the actual lung injury appearing in very immature infants is, however, unknown. Objectives To compare lung function at term in very immature infants and full-term infants, and to determine how degree and duration of neonatal hypoxaemia are related to other aspects of lung function. Design and methods All surviving, consecutive infants with gestational age below 28 weeks from a geographically defined area were eligible. The alveolararterial oxygen pressure difference was assessed as a measure of oxygenation failure. At term, functional residual capacity and gas-mixing efficiency were measured by multiple-breath nitrogen washout, and compliance and conductance of the respiratory system by the occlusion method. The results were compared to those in 50 full-term controls. Main results Thirty-seven of 46 eligible infants were included. The preterm infants differed markedly from the full-term infants in all lung functions tested. Infants diagnosed as having BPD had more compromised lung function than those without, but the latter group differed markedly from the full-term group in functional residual capacity, compliance and gas-mixing efficiency. Only the mechanical variables were correlated to hypoxaemia at 36 weeks postmenstrual age