This study examines the neonatal response to graded hypoxia and determines the arterial PO2 (PaO2) threshold for oxygen-restricted metabolism as confirmed by the development of lactic acidosis and altered oxygen handling. Anesthetized, intubated, and ventilated 3-day-old pigs (n = 56) were randomly assigned to one of five predetermined acute (120 min) graded hypoxia groups: normoxia (PaO2 = 80 Torr) or mild (60 Torr), moderate (40 Torr), moderately severe (30 Torr), or severe (20 Torr) hypoxia. In moderate hypoxia, lactate and acid-base homeostasis were unaltered due to a significant increase in oxygen extraction (P < 0.05) that was sufficient to maintain the arteriovenous oxygen content difference (oxygen uptake). In moderately severe hypoxia, increased arterial lactate and decreased HCO3- and base excess were evidence of anaerobic metabolism, yet pH was unaltered, indicating adequate buffering. In this group, despite the increase in oxygen extraction, oxygen uptake was reduced, indicating the onset of oxygen-restricted metabolism. The severe hypoxia group had significantly increased lactate (21.7 +/- 3.9 mmol/l), decreased pH (7.01 +/- 0.07) and base excess (-21.5 +/- 3.0 mmol/l), and depletion of HCO3- (9.7 +/- 1.6 mmol/l) (P < 0.0001). Here, increases in oxygen extraction were severely limited by availability, resulting in significantly reduced oxygen uptake, anaerobic metabolism, and profound lactic acidosis.