Anaesthetized, laterally recumbent horses were found to have large alveolar-arterial oxygen tension differences. These differences had a rapid onset following the induction of anaesthesia and remained constant during the anaesthetic period both in horses breathing spontaneously and in those subjected to intermittent positive pressure ventilation. It is suggested that the differences may result from mismatching of ventilation and perfusion due to the effect of gravity on the pulmonary circulation and restricted ventilation of the lower lung. The large fall in cardiac output found may, if unaccompanied by a decrease in oxygen utilization, augment the alveolar-arterial oxygen tension differences by causing a decrease in the mixed venous oxygen tension.