We examined whether arterial hypoxemia impairs incremental exercise performance in subjects with interstitial lung disease (ILD). Seven subjects underwent two incremental exercise tests on a bicycle ergometer in random order; one while breathing room air (RA), and the other while breathing 60% O2. Maximal exercise performance was impaired in all subjects: maximal oxygen uptake (peak VO2) was 56 +/- 4% predicted (+/- SEM); and all subjects demonstrated significant arterial oxygen desaturation during exercise breathing RA (mean 11 +/- 1%). Breathing 60% O2 during exercise resulted in a significant increase in peak VO2 (RA: 1.32 +/- 0.05 L/min; O2: 1.58 +/- 0.08 L/min; p < 0.05), exercise duration (RA: 390 +/- 21 s; O2: 458 +/- 24 s; p < 0.01) and maximal work load (RA: 112 +/- 6 watts; O2: 129 +/- 6 watts; p < 0.005). There was no significant difference in maximal minute ventilation (VI) achieved at the end of both tests. At matched ventilation (90% peak VI from the RA test), respiratory frequency (f) was significantly higher (RA: 33 +/- 2 breaths/min; O2: 35 +/- 2 breaths/min; p < 0.05), and tidal volume (VT) significantly lower (RA: 1.72 +/- 0.15 L; O2: 1.64 +/- 0.12; p < 0.05) when subjects exercised breathing oxygen. We conclude that arterial hypoxemia significantly impairs incremental exercise performance in subjects with ILD, but that mechanisms other than arterial oxygen desaturation are responsible for the rapid, shallow breathing pattern these subjects adopt during exercise.