We evaluated 48 patients with chronic obstructive pulmonary disease by means of pulmonary-function and exercise testing to determine whether any tests of pulmonary function could predict the development of arterial desaturation during exercise. We found that only two indexes--diffusing capacity and forced expiratory volume in one second (FEV1)--were predictive of desaturation. The diffusing capacity was more specific and sensitive than FEV1. A diffusing capacity above 55 per cent of predicted was 100 per cent specific in excluding desaturation, as compared with an 82 per cent specificity for an FEV1 above 55 per cent of predicted. With this cutoff point, the sensitivity of the diffusing capacity was 68 per cent, as compared with 46 per cent for the FEV1. Both the frequency and the magnitude of arterial desaturation increased substantially when the diffusing capacity was below 55 per cent of predicted. Testing the diffusing capacity should be useful in identifying which patients with chronic obstructive lung disease are likely to become desaturated during exercise and may therefore benefit from oxygen therapy.