To examine the relation between small-airways abnormalities and specific lung functions, we performed pulmonary-function tests in 36 patients, of whom two were nonsmokers, one to three days before open-lung biopsy for localized pulmonary lesions. The primary lesion in the small airways was a progressive inflammatory reaction leading to fibrosis with connective-tissue deposition in the airway walls. Increase in disease in small airways correlated with deterioration in lung function. Lesions could be reliably detected (P less than 0.05) by tests for closing capacity, the volume at which air and helium flow ere equal (a test of airway caliber and elastic recoil), and the slope of phase III of the single-breath washout curve (which tests evenness of ventilation). These tests showed abnormalities at a time when the pathologic changes were still potentially reversible and when other tests were not appreciably changed.