Thirty patients (17 with restrictive, eight with chronic obstructive pulmonary disease and five with combined pulmonary changes) were studied. Ordinary pulmonary function tests were made and in addition the transfer factor (diffusion capacity) was measured at rest and compared to the arterial oxygen tension at rest and during maximal exercise. There was a significant correlation (r = 0.89) between the transfer factor at rest and the oxygen tension during maximal exercise in both the patients with restrictive and those with obstructive lung disease, but no correlation was found between the transfer factor and the resting oxygen tension. Exercise induced hypoxaemia (PO2 less than 8-8.5 kPa) occurred in some patients and this could be predicted with an excellent sensitivity and specificity if a discrimination point for the transfer factor of 50 per cent of predicted or less was chosen. Determination of the transfer factor at rest is thus a good screening test for exertional hypoxaemia and can be used to select patients for exercise testing when the purpose is to detect hypoxaemia.