Pulmonary mechanics, using a two factor least mean square analysis technique, were determined in 22 preterm neonates with respiratory failure. The respiratory system is modelled as a linear mechanical system. Concurrent signals of airflow and transpulmonary pressure were utilized to calculate values of dynamic lung compliance and pulmonary resistances; these determinations were made over the entire tidal volume range. In addition, values of resistive work of breathing, pulmonary time constants, scalar records of sequential breaths, pressure-volume and flow-volume relationships were available for data review and interpretation. The mean +/- SEM value of tidal volume was 7.4 +/- 0.6 ml/kg; dynamic lung compliance was 0.44 +/- 0.04 ml/cmH2O/kg; and the pulmonary resistance of the whole breath was 106 +/- 9.1 cmH2O/liter/s. The resistive work of breathing (hysteresis) was 41.8 +/- 5.9 gm.cm/kg. In correlating the measured values of pressure and flow to those predicted by the model, the mean value of the correlation coefficient for the least mean square analysis for all 22 studies was 0.995 +/- 0.001; the standard error of estimate of the predicted pressure was less than 4.4% of the range of pressures measured. Thereby, the model was considered to be appropriate for the neonatal respiratory system. In addition to the traditional procedures of evaluating the respiratory status of a sick neonate, bedside analysis of pulmonary mechanics provide graphical information, and quantitative data which should be useful in day-to-day pulmonary management.