Fetal breathing movements (FBM) are considered necessary for normal growth and structural maturation of the fetal lung, but the underlying mechanisms are unclear. The small fluctuations in lung dimensions caused by FBM have been proposed as a stimulus to lung growth, but it is equally possible that FBM act by maintaining the basal level of lung luminal volume, which is an established determinant of fetal lung growth. Our aim, therefore, was to determine the effects of abolishing FBM, while retaining the integrity of the diaphragm, on the volume and rate of production of fetal lung liquid, gene expression for IGF-II, and fetal lung growth. FBM were abolished in seven fetal sheep by high spinal cord transection at 114 ± 1.2 d of gestation; seven intact fetuses served as controls. At 119 to 124, 125 to 130, and 131 to 136 d, we measured the volume and secretion rate of lung liquid by dye dilution. At these three age ranges, the lungs of cord-transected fetuses contained 27 to 53% less lung liquid than controls (p = 0.004), and their rates of secretion were 65 to 138% greater (p = 0.001). At postmortem (135 ± 0.1 d), the lungs of the cord transected fetuses contained less DNA per kg body weight and tended to be lighter and to contain less protein than controls. IGF-II gene expression in the lungs of cord-transected fetuses was significantly less than that in controls. We conclude that the abolition of FBM causes an initial reduction in the degree of lung expansion, which eventually leads to lung hypoplasia, possibly mediated by reduced IGF-II gene expression. FBM probably contribute to the maintenance of fetal lung liquid volume, and hence lung growth, by opposing the loss of lung liquid caused by the elastic properties of the lungs.