The effects of neonatal endotracheal tube (ETT) leakage on inspiratory compliance (Ci) and resistance (Ri) were examined using a lung model with constant compliance. An air leak was created at the end of an ETT. Flow was measured at, above and below the leak by a hot wire anemometer and a pneumotach. Tidal volume (VT) was derived from digitally integrated flow. Pressure was measured at the side port of the ETT adaptors above and below the leak. Percent of air leak (% leak) was defined as the difference between inspiratory volume above (VTa) and below (VTb) the leak divided by VTa and multiplied by 100. Ci and Ri were analyzed conventionally and by linear regression. Percent error of Ci was defined as the difference between inspiratory compliance above the leak (Cia) and below the leak (Cib) divided by Cia and multiplied by 100. The results showed that the inspiratory time (Ti) of the ventilatory setting is the most important factor for determining %leak. Percent error of Ci is in proportion to %leak. The change in inspiratory resistance is complicated, depending on the ventilatory setting, leak site resistance and the method of analysis. This study demonstrates the origin of the computational error in breaths with ETT leakage diagramatically and by use of mathematics. It suggests that air leakage may contribute to a high variability in compliance and resistance measurements.