We produced a localized right lower lobe (RLL) contusion in 14 anesthetized ventilated dogs, 7 of which were treated with positive end-expiratory pressure (PEEP group). We measured gas exchange, pulmonary mechanics, and regional function before and 5 h after the contusion. Arterial PO2 decreased by 20 Torr and venous admixture doubled in both groups during air breathing. The shunt fraction (Qs/Qt) was minimally increased, despite a large lobar Qs/Qt (0.43) in the contused RLL. These results were explained by reduced ventilation per unit volume (VA/V), and ventilation-to-perfusion ratios of the contused RLL measured with 133Xe technique. We conclude that pulmonary contusion causes a leak of blood and plasma, flooding 25% of the air spaces of the RLL at FRC, reducing the compliance of adjacent air spaces, and resulting in a reduced VA/V and a large RLL Qs/Qt. These results are consistent with the observed reduction in regional volume and perfusion in the contused RLL, and suggest that Qs/Qt was not increased because blood flow was markedly reduced to flooded air spaces. PEEP reduced the hypoxemia, but increased the contusion.