Serial measurements of pulmonary function during the first year of life were obtained in 38 premature infants following recovery from respiratory distress syndrome (RDS). Twenty-seven similar weight normal prematures were studied as controls. Serial measurements were made of functional residual capacity, dynamic compliance, and arterial blood gases. All infants following the acute phase of RDS showed decreases in functional residual capacity and/or dynamic compliance, arterial PO2 and mild to severe carbon dioxide retention. Nine nonventilated infants returned to normal by age 2 to 4 months. Eight of 11 infants ventilated for RDS with subsequent development of bronchopulmonary dysplasia died by age 5 months. The 3 survivors had increased FRC, markedly decreased dynamic compliance, relative hypoxia, and carbon dioxide retention throughout the first year. Eighteen ventilated infants with clinical recovery showed considerable individual variations, but the mean group arterial PO2 was lower than normal from 6 to 12 months of age. Abnormalities in chest radiographs were common in infants after ventilation and readmission to hospital for respiratory problems during the first year of life occurred in 8 of 21 surviving infants initially ventilated for RDS.