SummaryHypoxemia in liver cirrhosis has been attributed to increased pulmonary perfusion; lung function abnormalities have rarely been found in adults. In infants, however, smaller airways and the disproportion in size between the enlarged liver and abdominal cavity leading to lung compression by elevated diaphragms may well suggest that ventilation disturbances play an important role in the development of hypoxemia. We examined lung functions, ventilation‐perfusion scans, chest radiographs, and blood gases in air and 80% oxygen in 19 infants with biliary atresia (mean age 14 months) and found maximum flows at functional residual capacity (VmaxFRC) markedly decreased [48%± 29% (mean± SD)] and thoracic gas volume (TGV) elevated (156%± 30.2%). Po2 was <9.3 kPa in seven of 19 patients, in whom TGV was higher compared with the other patients (182% vs. 141%, p < 0.005). However, the decrease in Po2, was much more closely correlated to the amount of shunting (r = 0.62, p < 0.05) than to the reduced airway patency (VmaxFRC/TGV, r = 0.41, p = 0.08). We conclude that airway narrowing probably by lung compression is present more frequently in infants than in adults with liver disease. We found some evidence that hyperinflation contributes to the observed low Po2 values, possibly aggravated by inadequate vasoconstriction to hypoxic stimuli. However, pulmonary shunting independent of ventilatory disturbances more readily explained hypoxemia already present in these infants.