Pulmonary function tests and fluid balance were measured serially during treatment with dexamethasone in seven ventilator-dependent, 14- to 27-day-old infants. The infants showed no improvement in respiratory status during the prior 5 days. Birth weights ranged from 540 to 900 g, with gestational ages of 24 to 26 weeks. The decision to treat the infants with dexamethasone was made by the clinical team. Pulmonary function tests were performed prior to the first dose and then every 12 hours until extubation. Significant differences were first seen after only 12 hours of treatment. Five infants were extubated within 48 hours of starting therapy. Before extubation at 48 hours, changes were found in dynamic compliance (74% increase), total pulmonary resistance by midvolume and regression methods (38% and 35% decreases, respectively), and expiratory time constant (49% increase), with P less than .01 in all cases. An increase in urine output was also observed in the first 12 hours. Improvements in chronic lung disease produced by dexamethasone are rapid and may result from dexamethasone-induced pulmonary fluid shifts.