In respiratory distress syndrome (RDS), PEEP improves arterial oxygenation but may impair cardiac output. The effects of PEEP on gas exchange and hemodynamics were studied in 12 mechanically ventilated newborns in the acute phase of RDS. Stepwise increase in PEEP resulted in both a) a progressive increase in PaO2 and transcutaneous oxyhemoglobin saturation, and b) a depression of pulsed Doppler-measured cardiac output that was statistically significant at 9 cm H2O PEEP. Thus, averaged systemic oxygen delivery (DO2) was maintained with improved arterial oxygenation up to 6 cm H2O PEEP. Further increase in PEEP induced a significant fall in DO2. No variation was observed in heart rate and mean arterial pressure. The combined use of oximetry and pulsed Doppler echocardiography enables noninvasive optimization of mechanical ventilation and PEEP during the clinical course.