OBJECTIVE To determine the mechanism of impairment of pulmonary transfer factor for carbon monoxide (TL(CO)) in heart transplant candidates, as this is the most common lung function abnormality. METHODS Regional cardiopulmonary transplant centre. METHODS TL(CO) and its components (the diffusing capacity of the alveolar-capillary membrane (D(M)) and the pulmonary capillary blood volume (V(C))) were measured using the Roughton and Forster method and the single breath technique in 38 patients with severe chronic heart failure awaiting heart transplantation (mean age 51 years, range 19 to 61; mean left ventricular ejection fraction 12.8%). Results were compared with data from 26 normal subjects (mean age 47 years, range 27 to 62). RESULTS Mean per cent predicted TL(CO), D(M), and V(C) were significantly reduced in patients (69.9%, 81.4%, and 80.2% of predicted, respectively) compared with controls (97.7%, 100.1%, and 102.3% of predicted, respectively, p < 0.001). The relative contribution of the two components of TL(CO) in patients was similar to that of normal subjects, with each component accounting for approximately 50% of the total resistance to diffusion (1/TL(CO)). CONCLUSIONS TL(CO) impairment in patients with severe chronic heart failure awaiting heart transplantation results from a proportionate reduction in both D(M) and V(C), suggesting a significant disturbance of the pulmonary vascular bed.