1. In healthy, normal subjects simultaneous peripheral venous occlusion of all four limbs caused a small but significant increase in vital capacity (VC) and single-breath carbon monoxide transfer factor (DLCO) without significantly changing total lung capacity (TLC), residual volume (RV), pulmonary gas flow or pulmonary compliance. 2. Immersion in water to the neck resulted in a small but significant fall in VC, FEV 1.0/FVC and TLC, and a rise in DLCO, but flow/volume curves and 'closing volume' were unchanged. Peripheral venous occlusion during immersion only significantly increased VC and DLCO; pulmonary compliance and flow/volume curves did not alter significantly. 3. It is concluded that peripheral venous occlusion produces these effects by altering intrathoracic blood volume. Water immersion reduces TLC, mainly from the hydrostatic pressure, and VC is reduced from both the hydrostatic pressure and the increase in intrathoracic blood volume consequent on immersion. The increase in DLCO is due, almost entirely, to the increase in intrathoracic blood volume.