During a 15-month period, 27 patients were seen in a routine clinical pulmonary function laboratory in whom the transfer coefficient (TLCO/VA or KCO), measured by the single breath technique, was increased. Pulmonary haemorrhage accounted for two-thirds of the cases; in them sequential measurements of KCO were able to monitor the onset and cessation of bleeding. In the remaining cases the cause of the increase in KCO remains uncertain. All patients had a reduction in vital capacity. Experiments in six normal subjects showed that KCO rose as the breath-holding lung volume was reduced, but that this was insufficient to account for the raised KCO in patients with reduced volumes. Partitioning of the two components of TLCO at different lung volumes in three normal subjects showed that an increase in pulmonary capillary blood volume per unit alveolar volume was chiefly responsible for the increase of KCO in normal subjects at lower lung volumes. The membrane diffusing capacity changed less than predicted per unit volume, suggesting that the thickness of the air-blood barrier remains fairly constant as the lung expands or contracts.