The aim of this study was to assess the consequences of preterm birth for the functional development of the lungs. We studied 32 healthy preterm infants (gestational age 25 to 33 wk at birth) and 53 healthy full-term infants (37 to 42 wk) at the same mean postmenstrual age of 40 wk with a multibreath nitrogen washout technique to assess functional residual capacity (FRC), gas mixing efficiency, and dead space and with the single-breath occlusion technique to calculate compliance and resistance of the respiratory system. Twenty of the preterm infants were also assessed with the same methods at 34.2 (32 to 37) wk. At the same postmenstrual age the preterm infants had lower FRC/kg body weight, lower specific compliance, impaired gas mixing efficiency, and higher total and dead space ventilation/kg than the full-term infants. Specific compliance and specific conductance decreased but gas mixing efficiency increased from 34 to 40 wk. We conclude that premature exposure to extrauterine conditions changes lung function. Preterm infants showed signs of dysfunction of the terminal respiratory units and higher elastic recoil than infants who spent the corresponding time for development in utero. It is suggested that preterm birth per se affects alveolarization and formation of elastic tissue in the lungs.