Bronchoalveolar carcinoma (BAC) is a relatively rare form of primary lung cancer. Over a 7-year period we encountered 7 patients with BAC in a series of 500 patients. All 7 patients had hypoxemia and increased alveolar-arterial oxygen pressure gradient, 3 had hypercapnia, 4 had polycythemia, and 1 had cor pulmonale. BAC differs from the more usual forms of bronchogenic carcinoma in that veno-arterial shunting can be part of the complex clinical picture, and death can thus result from respiratory insufficiency. The veno-arterial shunting may be caused by alveolar lesions and by large quantities of mucoid secretions. Hyperproduction of mucus can also result in fluid and electrolyte depletion. Bronchoalveolar carcinoma bears a close histologic and clinical resemblance to a lung tumor in sheep. Localized BAC shows a good longterm response to surgical resection, but only palliative therapy has been experienced in the diffuse form of the disease.