Lung mechanics, arterial oxygen saturation (Sao2) and effective pulmonary capillary blood flow (Qe) were measured before and after intratracheal administration of 1—3 ml/kg body wt. of fresh or sea water in 20 intact and 11 vagotomized sheep during light thiopentone anesthesia. A gross fall in lung compliance (Cl) occurred in all animals after introduction of fresh and sea water; the fall was greater in intact than in vagotomized animals. A variable increase in nonelastic resistance was mainly due to blocking of airways by fluid and foam. Fall in Cl appeared to be the consequence of a reaction within the lungs resulting in a widespread closure of the terminal airways, which was influenced by the vagus nerve but not abolished by vagotomy. By relating Cl and Qe, hypoxemia induced by fluid was explained in terms of altered lung mechanics. Forced inflation increased Cl after fresh water and to a greater extent in vagotomized animals, but produced no change after sea water. A method of resuscitation is suggested based on the change in lung mechanics. With the use of 100% oxygen this method restored normal Sao2 independent of amount of fluid in the lung. Submitted on December 28, 1960