Abnormalities of pulmonary surfactant function have been described in association with the acute respiratory distress syndrome (ARDS). Because gram‐negative sepsis is a common cause of ARDS, we treated neonatal piglets with Escherichia coli endotoxin to create a neonatal ARDS model. We hypothesized that under these conditions administration of exogenous surfactant would improve pulmonary function. Study groups included: control (n = 8), Exosurfk (5 mL/kg. 13.5 mg phospholipid/mL, n = 7), Survantak (4 mL/kg. 25 mg phospholipid/mL, n = 6), and saline (5 mL/kg, n = 6). E. coli endotoxin 12 μg/kg was infused over 30 min and resulted in significant pulmonary and hemodynamic abnormalities, histopathologic evidence of nonhomogeneous lung injury, and elevated protein levels in bronchoalveolar lavage washings. Neither Exosurfk nor Survantak ameliorated the pulmonary effects of endotoxin. Instead, there was a prolonged decrease in arterial oxygen tension (PaO2) and dynamic lung compliance after administration of surfactant and saline. Distribution of a bolus of Exosurfk was uneven throughout the lung. We conclude that in this neonatal piglet model of ARDS, bolus surfactant administration had a detrimental effect on oxygenation and pulmonary function. Pediatr Pulmonol. 1996; 22:376–386. © 1996 Wiley‐Liss, Inc.