This review examines the possible mechanisms for the impairment in pulmonary gas exchange and ventilatory control associated with general anaesthesia. Venous admixture and physiological dead space are both increased during anaesthesia. These changes result from increased ventilation-perfusion inequality, an effect apparently mainly attributable to alteration in the intrapulmonary distribution of ventilation. Concomitantly, with these changes in pulmonary gas exchange anaesthesia is known to alter the mechanics of the respiratory system and, in particular, to decrease functional residual capacity in recumbent subjects. Recent research has renewed interest in the finding that anaesthesia also alters chest wall shape and motion. This review attempts to synthesize the available and increasing evidence which supports the hypothesis that anaesthesia-induced alterations in chest wall behavior are responsible for the associated changes in lung function and consequent impairment of pulmonary gas exchange. Finally, the important finding that anaesthetic agents depress the ventilatory response to hypercapnia and hypoxia is discussed.