Living in a damp home has been associated with impaired respiratory health in previous studies, but objective data on lung function variability and atopy have been lacking from most studies. Data collected in the winter of 1993-1994 in the framework of the PEACE study (Pollution Effects on Asthmatic Children in Europe) were used to study the association between home dampness and Peak Flow (PEF) variability, frequency of respiratory symptoms and relief medication use during the period of observation. Children were selected with a screening questionnaire on the basis of positive answers to questions on symptoms of asthma and chronic cough. Children were instructed to perform PEF measurements with Miniwright PEF meters twice daily over a period of 2 months. Parents kept diaries on respiratory symptoms and medication use of their children. Data on demographic and housing characteristics were derived from a parent-administered questionnaire. As indicators for home dampness reported moisture stains and moulds were used. Children were tested for atopy with skin-prick tests. Data from 1614 children from 13 centres in 10 different countries were available for analysis. Linear regression models and prevalence rate ratios were used to investigate the association between home dampness and PEF variability and the period prevalence of cough, phlegm, lower and upper respiratory symptoms and bronchodilator use. In atopic children, PEF variability was positively related to self-reported moulds but not to moisture stains. The period prevalence of cough and upper respiratory symptoms was significantly higher in children living in houses with reported moulds, compared with 'dry' homes. These results show that self-reported moulds in homes are associated with objective as well as subjective markers of airway lability in European children with chronic respiratory symptoms.