Vascular conductance (flow rate per unit of arteriovenous pressure gradient) was studied in the degassed lung lobe in which saline solution was used to fill the airway and the pleural space, and to perfuse the blood vessels at selected arterial and venous pressures. This preparation eliminated effects due to surface, osmotic, and hydrostatic forces, those due to geometric relationships resulting from distention of the lung, and those which result from oscillations of pressures in the airway and in the vessels. All the data obtained could be treated in a consistent manner by considering the airway pressure to be the zero reference level. The phenomenon of critical closing could be demonstrated as a mechanical effect due to negative transmural capillary pressure; thus, when airway pressure exceeded arterial and venous pressures, conductance was zero. As arterial pressure was raised above airway pressure, fluid was displaced from the intralobar (airway) compartment. Conductance was correlated directly with the volume of displacement of fluid from the intralobar compartment. These data indicated that intralobar vessels, presumably the alveolar capillaries, opened when transmural pressure was positive and closed when it was negative. Variations in conductance occurred with changes in transmural pressure. Positive transmural pressures were produced by elevations of arterial or venous pressures, or by a lowering of airway pressures. When intralobar capillary transmural pressure was about +7 cm. of saline, conductance was maximal. Changes in the degree of filling of the lung lobe, or in the volume of fluid in the vessels exposed to the pleural surface, had no significant effects on conductance. Recurrent oscillations of the system were observed at transmural pressure of approximately zero. These oscillations were similar to the patterns of recurrent closure and opening of soft-walled vessels (flitter) noted in previous studies. Conductance was proportional to the period during which the vessel was open (duty cycle). It is shown that marked changes in pulmonary vascular conductance can be produced by mechanical effects at the collapsible intra-alveolar capillary. Before changes in conductance can be attributed to humoral, neurogenic, or pharmacologic factors, the potential mechanical effects on conductance of changes in transmural pressure at the capillary must be controlled.