Acute respiratory failure and anaesthesia impede ventilation of dependent lung units and perfusion of non-dependent ones, creating considerable ventilation-perfusion (V/Q) mismatch. General PEEP can improve V/Q but it cannot restore it to normal. To improve matching, ventilation must be distributed in proportion to regional blood flow. This can be accomplished by (1) placing the subject in the lateral position, (2) ventilating each lung in proportion to its blood flow (differential ventilation), and (3) applying PEEP solely to the dependent lung to ensure even distribution of inspired gas within that lung (selective PEEP). Differential ventilation with equal distribution of the tidal volume between the lungs and a selective PEEP of 10 cm H2O to the dependent lung resulted in equal distribution of perfusion between the lungs in anaesthetized healthy subjects, suggesting "optimum" V/Q matching. Using this ventilator setting as a rule of thumb in patients with acute, severe, bilateral lung disease, arterial oxygen tension was improved by an average of 45% compared with that during general PEEP, with no reduction in cardiac output. It is concluded that differential ventilation with selective PEEP can offer considerable improvement in gas exchange in acute, bilateral lung disease. However, long-term studies are required before a final evaluation can be made.