Pulmonary mechanics were determined at 0, 3, 6, and 10 cm H2O positive and expiratory pressure (PEEP) in premature lambs at a mean gestational age of 134 days. Functional residual capacity increased (p less than 0.005) by 7% (1.6 ml/kg) per cm H2O PEEP. Dynamic lung compliance and specific compliance significantly decreased by 10% (0.11 ml/cm H2O/kg) and 9% (0.0051 l/cm H2O) per cm H2O PEEP, respectively, for PEEP above 3 cm H2O level. Inspiratory lung resistance increased significantly (p less than 0.05) only between 0 and 6 cm H2O PEEP while expiratory lung resistance increased (p less than 0.05) between 0 cm H2O PEEP and all higher levels. The data suggest that PEEP in excess of 3 cm H2O produces undesirable effects on lung mechanics in premature lambs. These results may be important in predicting contraindications and potential complications of positive pressure breathing in the newborn.