Background. Early administration of high doses of dexamethasone may reduce the risk of chronic lung disease in premature infants but can cause complications. Whether moderate doses would be as effective but safer is not known. Methods. We randomly assigned 220 infants with a birth weight of 501 to 1000 g who were treated with mechanical ventilation within 12 hours after birth to receive dexamethasone or placebo with either routine ventilatory support or permissive hypercapnia. The dexamethasone was administered within 24 hours after birth at a dose of 0.15 mg per kilogram of body weight per day for three days, followed by a tapering of the dose over a period of seven days. The primary outcome was death or chronic lung disease at 36 weeks' postmenstrual age. Results. The relative risk of death or chronic lung disease in the dexamethasone-treated infants, as compared with those who received placebo, was 0.9 (95 percent confidence interval, 0.8 to 1.1). Since the effect of dexamethasone treatment did not vary according to the ventilatory approach, the two dexamethasone groups and the two placebo groups were combined. The infants in the dexamethasone group were less likely than those in the placebo group to be receiving oxygen supplementation 28 days after birth (P=0.004) or open-label dexamethasone (P=0.01), were more likely to have hypertension (P<0.001), and were more likely to be receiving insulin treatment for hyperglycemia (P=0.02). During the first 14 days, spontaneous gastrointestinal perforation occurred in a larger proportion of infants in the dexamethasone group (13 percent, vs. 4 percent in the placebo group; P=0.02). The dexamethasone-treated infants had a lower weight (P=0.02) and a smaller head circumference (P=0.04) at 36 weeks' postmenstrual age. Conclusions. In preterm infants, early administration of dexamethasone at a moderate dose has no effect on death or chronic lung disease and is associated with gastrointestinal perforation and decreased growth. Copyright © 2001 Massachusetts Medical Society.