Background: This study was undertaken to determine whether alveolar dead space increases during intramedullary nailing of femoral shaft fractures and whether alveolar dead space predicts postoperative pulmonary dysfunction in patients undergoing intramedullary nailing of a femoral shaft fracture. Methods: All patients with a femoral shaft fracture were prospectively enrolled in the study unless there was evidence of acute myocardial infarction, shock, or heart failure. Arterial blood gases were measured at three consecutive time-periods after induction of general anesthesia: before intramedullary nailing and ten and thirty minutes after intramedullary nailing. The end-tidal carbon-dioxide level, minute ventilation, positive end-expiratory pressure, and percent of inspired and expired inhalation agent were recorded simultaneously with the blood-gas measurement. Postoperatively, all subjects were monitored for evidence of pulmonary dysfunction, defined as the need for mechanical ventilation or supplemental oxygen (at a fraction of inspired oxygen of >40%) in the presence of clinical signs of a respiratory rate of >20 breaths/min or the use of accessory muscles of respiration. Results: Seventy-four patients with a total of eighty femoral shaft fractures completed the study. Fifty fractures (62.5%) underwent nailing after reaming, and thirty fractures (37.5%) underwent nailing with minimal or no reaming. The mean alveolar dead-space measurements before canal opening and at ten and thirty minutes after canal opening were 14.5%, 15.8%, and 15.2% in the total series of seventy-four patients (general linear model, p = 0.2) and 20.5%, 22.7%, and 24.2% in the twenty patients with postoperative pulmonary dysfunction (general linear model, p = 0.05). Of the twenty-one patients with an alveolar dead-space measurement of >20% thirty minutes after nailing, sixteen had postoperative pulmonary dysfunction. According to univariate and multivariate analysis, the alveolar dead-space measurement was strongly associated with postoperative pulmonary dysfunction. Conclusions: According to our data, intramedullary nailing of femoral shaft fractures did not significantly increase alveolar dead space, and the amount of alveolar dead space can predict which patients will have pulmonary dysfunction postoperatively.