Background: Sustained inflation (SI) at birth facilitates establishment of functional residual capacity (FRC) in the preterm lung, but the ideal lung recruitment strategy is unclear. We have compared the effect of SI and a stepwise positive endexpiratory pressure (PEEP; SEP) strategy in a preterm model. Methods: 127 d gestation lambs received either 20-s SI (n = 9) or 2 cmH 2 O stepwise PEEP increases to 20 cmH 2 O every 10 inflations, and then decreases to 6 cmH 2 O (n = 10). Ventilation continued for 70 min, with surfactant administered at 10 min. Alveolar-arterial oxygen gradient (AaDO 2 ), compliance (C dyn ), end-expiratory thoracic volume (EEV RIP ; respiratory inductive plethysmography), and EEV and C dyn in the gravitydependent and nondependent hemithoraces (electrical impedance tomography) were measured throughout. Early mRNA markers of lung injury were analyzed using quantitative real-time PCR. results: From 15 min of life, AaDO2 was lower in SEP group (P < 0.005; two-way ANOVA). SEP resulted in higher and more homogeneous C dyn (P < 0.0001). Mean (SD) EEV RIP at 5 min was 18 (9) ml/kg and 6 (5) ml/kg following SEP and SI, respectively (P = 0.021; Bonferroni posttest); this difference was due to a greater nondependent hemithorax EEV. There was no difference in markers of lung injury. conclusion: An SEP at birth improved gas exchange, lung mechanics, and EEV, without increasing lung injury, compared to the SI strategy used.