The physiological effects of anemia in the preterm infant are complex and the indications for transfusions in preterm infants are controversial. A measure of the adequacy of tissue oxygenation may be a better guide to the need for transfusions than currently used criteria. This article considers 2 measures of tissue oxygenation of preterm infants: 1) The whole blood lactate concentration, and 2) Peripheral fractional oxygen extraction (FOE) by using near infrared spectroscopy. Several studies have shown falls in blood lactate concentration after blood transfusion, but it has been difficult to establish a convincing link between raised lactate concentrations and significant anemia because even anemic infants have lactate concentrations that are within or close to the normal range. Lactate concentrations may be affected by the haematocrit of the blood sample. Peripheral FOE can be measured by using near infrared spectroscopy with partial venous occlusion and has been studied in preterm infants with symptomatic and asymptomatic anaemia. Mean (SD) FOE was significantly higher in symptomatic [0.425 (0.06)] (P< .01) but not asymptomatic [0.334 (0.05)] compared to controls [0.352 (0.06)], (P = .22). After transfusion there was a significant fall in FOE in symptomatic infants to 0.367 (0.06) (P = .001) but there was no change in infants who were asymptomatic. FOE correlated with other measures known to reflect the adequacy of oxygen availability during anemia. These results suggest that peripheral FOE may be suitable as a guide to the need for blood transfusions. A pilot randomized controlled trial is currently being undertaken to test this hypothesis.