Angiotensin-converting enzyme (ACE) activity in the guinea pig fetal-placental unit was assessed at the different oxygen tensions found in utero, during labor, and at birth. To determine fetal-placental ACE activity, we separately perfused in situ term guinea pig fetuses and their placentas via the umbilical vessels under controlled conditions of flow, temperature, and pH. ACE activity was defined as the percent of angiotensin I (AO) or bradykinin (BK) in Krebs-Henseleit solution cleared by a single passage through the placenta or fetus. Peptide concentrations were measured by radioimmunoassay (RIA). Using BK as substrate, we found that placental and fetal ACE activities were reflected by 45% (SD = 10) and 24% (SD = 7) clearances, respectively, at a perfusate PO2 of 29 mm Hg. Maternal hypoxia (PaO2 = 28 mm Hg) decreased placental ACE activity to 16% (SD = 8) and maternal hyperoxia (PaO2 = 191 mm Hg) increased placental ACE activity to 56% (SD = 9). Using a perfusate PO2 of 95 mm Hg, fetal and placental ACE activity increased in less than 5 minutes to 75% (SD = 10) and 77% (SD = 9), respectively. Similar results were obtained using AI as substrate. We conclude that: fetal-placental ACE activity exhibits a chronically reduced level of activity appropriate to the low oxygen tension found in the fetal-placental unit; the placenta is the primary site of ACE activity in the fetus; maternal oxygenation modulates fetal-placental ACE activity; and fetal ACE activity acutely increases with increased fetal oxygenation and thus may play an important physiological role in the regulation of circulating levels of BK and AII and the circulatory adjustments at birth.