The mechanism by which oligohydramnios produces lung hypoplasia is not understood. The current theory that extrinsic compression of the fetal thorax causes hypoplasia, either by inhibiting breathing movements or by squeezing out lung liquid, is not supported by observational or experimental data, or by our finding of decreased amniotic pressure around the fetus in oligohydramnios. We hypothesize that lung hypoplasia results from excess loss of lung liquid because of a reduction in amniotic pressure, and hence an increase in the alveolar-amniotic pressure gradient. The magnitude of this increased pressure gradient is calculated to exceed the small standing tracheal pressure; thus low amniotic pressure overcomes the normal laryngeal retentive mechanisms and allows a larger quantity of lung liquid to escape. In the prevention of pulmonary hypoplasia, a role is suggested for the instillation of artificial amniotic fluid to restore normal amniotic pressure.