We previously found that, following surgical resection of approximately 58% of lung units by right pneumonectomy (PNX) in adult canines, oxygen-diffusing capacity (Dl(O(2))) fell sufficiently to become a major factor limiting exercise capacity, although the decline was mitigated by recruitment, remodeling, and growth of the remaining lung units. To determine whether an upper limit of compensation is reached following the loss of even more lung units, we measured pulmonary gas exchange, hemodynamics, and ventilatory power requirements in adult canines during treadmill exercise following two-stage resection of approximately 70% of lung units in the presence or absence of mediastinal distortion. Results were compared with that in control animals following right PNX or thoracotomy without resection (Sham). Following 70% lung resection, peak O(2) uptake was 45% below normal. Ventilation-perfusion mismatch developed, and pulmonary arterial pressure and ventilatory power requirements became markedly elevated. In contrast, the relationship of Dl(O(2)) to cardiac output remained normal, indicating preservation of Dl(O(2))-to-cardiac output ratio and alveolar-capillary recruitment up to peak exercise. The impairment in airway and vascular function exceeded the impairment in gas exchange and imposed the major limitation to exercise following 70% resection. Mediastinal distortion further reduced air and blood flow conductance, resulting in CO(2) retention. Results suggest that adaptation of extra-acinar airways and blood vessels lagged behind that of acinar tissue. As more lung units were lost, functional compensation became limited by the disproportionately reduced convective conductance rather than by alveolar diffusion disequilibrium.