The mechanisms for the onset of continuous breathing at birth as opposed to episodic in-utero breathing remain unknown. To investigate the role of vagal innervation, we studied 24 newborn lambs; 13 underwent bilateral vagotomy below the recurrent laryngeal nerves, 9 were sham-operated and autopsy revealed 2 animals to be partially (unilaterally) vagotomized. Each fetus was instrumented between 128-133 days gestation (term = 147 ± 2 d) to record the sleep state, breathing activity and blood gas tensions. The lambs were allowed to deliver normally. All but one (12/13) vagotomized animals developed respiratory failure whereas only one of 9 sham-operated animals did not establish effective gas exchange (P<0.001) whereas both partially vagotomized animals survived. The gestational ages of the animals in all three groups were similar. The vagotomized animals did not manifest the intense arousal normally seen in both human and ovine species. By five minutes of age, the vagotomized animals developed respiratory failure. The frequency of breathing slowly decreased from 46 ± 16 breaths per minute to 24± 16 breaths by 30 minutes of age whereas in sham operated animals it decreased from 89 ± 13 to 71 ± 23 (P<0.01). The T, gradually increased from 0.5 ± 0.36 to 1.4 ± 1.1 sec in vagotomized animals whereas in sham operated animals, it remained unchanged at 0.4 to 0.5 sec. To exclude the upper airway obstruction, the animals received intratracheal continuous positive pressure but they continued to remain in respiratory failure. No significant histological abnormalities were detected in either group. However, the surface tension measured by the captive bubble technique (Schürch et al 1989) on the BAL showed very poor surface activity in vagotomized animals, intermediate activity in partially vagotomized animals and excellent activity in sham operated animals. In summary, our results provide new evidence that vagal innervation(intra-thoracic with intact recurrent laryngeal nerves) is critical for the establishment of successful transition from fetal to neonatal life. Furthermore, the data suggest that a deficient surfactant synthesis/release mechanism may be responsible for respiratory failure.