Transfer of oxygen and carbon dioxide over the alveolocapillary membrane is the main function of the lungs and can be measured by the diffusing capacity for carbon monoxide (CO). CO has a high affinity for hemoglobin and is absent in pulmonary capillary blood. After inspiration CO diffuses by the pressure gradient from the alveoli into the capillary blood and disappears from the alveolar gas.The reduction of CO in alveolar gas in a fixed time interval quantifies the diffusing capacity of the lungs and is expressed per unit lung volume. Lung volume is measured simultaneously with CO diffusion by means of helium dilution. For children who cannot perform the singlebreath maneuver or who have a lung volume below 1.5 liters this technique is not feasible. In this case a rebreathing method can be used where the decay of CO is monitored continuously in a closed system while the child breathes quietly. Diffusion measurements have several pitfalls.The measurements are inaccurate in case of severe airway obstruction due to inadequate time for equilibration of the gases in the airways. At reduced lung volume, diffusion per unit lung volume increases and this may lead to erroneous interpretation of data in children with restrictive lung disease. In this case the use of appropriate reference values, obtained at the relevant lung volumes, is mandatory. Falsely high diffusing capacity may be found due to the presence of blood in the airways and alveoli, or in the case of relative hyperperfusion. Indications for assessment of diffusing capacity in children include monitoring during and after chemotherapy or irradiation, diagnosis and monitoring of interstitial lung disease, and monitoring for pulmonary bleeding disorders. Other possible applications are assessment of residual lung disease in children with congenital lung disease or after neonatal lung damage, and monitoring of lung function in children with chest deformities and/or neuromuscular disease.