Male Fischer-344 rats (control, C = 12; experimental, E = 11) were subjected to pulmonary-function testing procedures. The experimental group was then exposed to 0.7 ppm ozone for 28 d, 20 h/d, and both groups were tested at the termination of the exposure and after 4 and 9 wk of recovery in clean filtered air. Another group of animals (C = 6, E = 12) was similarly treated, but at each test point one-third were sacrificed for microscopic evaluation. When percent changes from preexposure values were compared to controls at each time point, the ozone exposure produced obstructive changes in the lung, including significant decreases (p less than 0.05) in forced expiratory flows (MEF25 40.3%, MEF10 70.7%), lung volumes (IC 22.5%, FVC 21.8%), and DLCO (20.7%); and a significant increase in functional residual capacity (FRC 61.1%). The total lung capacity (IC + FRC) was not significantly changed by the ozone. Microscopic examination revealed characteristic lesions in the region of terminal bronchioles and central acinar alveoli marked by peribronchiolar edema, bronchiolization of alveolar duct epithelium, and type II cell proliferation in involved alveoli with increased numbers of macrophages and a few leucocytes. Clearly discernable was a focal interalveolar-alveolar duct reaction made up of fibroblasts, a few inflammatory cells, and conspicuous mast cells, all embedded in a loose metachromatic matrix. After 4 wk of recovery, all measurements of lung volume and DLCO had returned to the values of the control group; however, even after 9 wk some of the measurements of lung flow (MEF25, MEF10) remained significantly although less depressed (27.9 and 40.1%, respectively). Histologically, after 4 wk recovery, there remained only a slight unevenly disturbed inflammatory reaction. In these foci there was often a residual, narrower, more condensed band of eosinophilic material, presumably collagen, that sometimes contained interspersed mast cells. After 9 wk, this collagen accumulation within the thickened wall of the alveolar duct could occasionally still be noted. These data suggest that the florid response seen at the end of exposure was related to the obstructive changes measured and that, with recovery, the residual central acinar-alveolar duct thickening may be responsible for the persistently diminished air flows.