Newborn rats were maintained in an hypoxic chamber (10% O2 in N2) from the day of birth up to 2 wk of postnatal life. Body weight (BW) and nose-tail length were less in the hypoxic exposed (H) rats than in control (C) animals growing in air. Hematocrit rose from about 37% to about 51%. Oxygen consumption (VO2), measured with a manometric method, was lower in H than in C rats; the difference remained at 5-7 days even after normalization by BW. At 5-7 days ventilation, measured with an airflow plethysmograph, was much more elevated in H rats (whether breathing 10% O2 or air) than in C rats, with an increase in both tidal volume and frequency. This indicates that the biphasic ventilatory response, characterized by an initial rise and then a fall of ventilation toward normoxic values, commonly observed in newborns during acute hypoxic challenge is an immediate but only transient response. The dry lung weight-to-BW ratio and alveolar size were larger in H than in C rats. Lung volumes at 20 cmH2O were similar, despite the smaller BW of the H rats. Hence, in the rat, chronic hypoxia in the immediate postnatal period increases O2-carrying capacity, decreases metabolic demands, increases alveolar O2 availability, and promotes structural changes in the lung that protect the gas exchange area and optimize the structure-function relationship of the lung. These results may also suggest that the lung structural alterations with chronic hypoxia should not be attributed to changes in VO2 but, eventually, to the ventilatory action of the organ.