1. During fetal life the lung develops as a liquid-filled organ. This liquid is produced by the fetal lung and leaves via the trachea from where it is either swallowed or enters the amniotic sac. Fetal lung liquid plays a crucial role in the growth and development of the lungs by maintaining them in a distended state. It is now recognized that the retention of liquid within the future airways is required to maintain the lungs at an appropriate level of expansion in order to stimulate their growth. Indeed, it is likely that most, if not all, of the conditions and malformations that lead to inadequate growth of the fetal lung do so by reducing the volume of lung liquid and hence the degree of lung expansion. 2. The volume of fetal lung liquid is principally regulated by the resistance to lung liquid efflux through the fetal upper airway and by the presence of diaphragmatic activity associated with fetal breathing movements (FBM). During non-breathing periods, the relatively high resistance offered by the upper airway to the efflux of lung liquid opposes the loss of liquid from the lung, thereby maintaining fetal lung expansion. During episodes of FBM, when the larynx is actively dilated and the resistance to lung liquid efflux is reduced, lung liquid leaves the lungs at an increased rate. However, selective inhibition of diaphragmatic muscle activity in the foetus leads to a reduction in lung liquid volume, rather than an increase. This finding indicates that during periods of FBM, rhythmical contractions of the diaphragm retard the loss of lung liquid and help to maintain lung expansion when the upper airway resistance is reduced. It is now apparent that the maintenance of lung expansion by FBM is the basis for their role in promoting fetal lung growth. 3. Successful transition from intra-uterine to extra-uterine life is dependent upon the clearance of liquid from the fetal lungs at the time of birth so that the lungs may effectively function as an organ of gas exchange.(ABSTRACT TRUNCATED AT 400 WORDS)