A localized right lower lobe (RLL) contusion was produced in 14 anesthetized, ventilated dogs, 7 of which were treated with positive end-expiratory pressure (PEEP group). Gas exchange, pulmonary mechanics and regional function were measured before and 5 h after the contusion. Arterial PO2 [O2 partial pressure] decreased by 20 Torr and venous admixture doubled in both groups during air breathing. The shunt fraction (.ovrhdot.Qs/.ovrhdot.Qt) was minimally increased, despite a larger lobar .ovrhdot.Qs/.ovrhdot.Qt (0.43) in the contused RLL. These results were explained by reduced ventilation per unit volume (.ovrhdot.VA/V), and ventilation-to-perfusion ratios of the contused RLL measured with 133Xe technique. Pulmonary contusion causes a leak of blood and plasma, flooding 25% of the air spaces of the RLL at FRC, reducing the compliance of adjacent air spaces and resulting in a reduced .ovrhdot.VA/V and a large RLL .ovrhdot.Qs/.ovrhdot.Qt. These results are consistent with the observed reduction in regional volume and perfusion in the contused RLL, and suggest that .ovrhdot.Qs/.ovrhdot.Qt was not increased because blood flow was markedly reduced to flooded air spaces. PEEP reduced the hypoxemia, but increased the contusion.