The effect of a recirculating air filter unit on concentrations of airborne bacteria, clinical and subclinical respiratory disease and production performance of veal calves was studied over a period of one year. Six groups of 28 calves in sheds with internally filtered air were paired by age and time of entry with six similar groups in non-filtered sheds; they were also compared with 23 groups, each of 28 calves, in non-filtered sheds present in the unit during the period of study. Mean aerial bacteria concentration in filtered sheds was reduced by 44.9 per cent (P less than 0.0001). A comparison of unfiltered and filtered sheds on a paired basis showed that the number of animals requiring antibiotic treatment for respiratory disease was reduced by 19.3 per cent (P greater than 0.05). The number of repeat courses of treatment was reduced by 28.9 per cent (P less than 0.025) and total antibiotic usage was reduced by 34.8 per cent (P less than 0.025). At slaughter the average area of lung consolidation in calves from filtered sheds was reduced by 38.4 per cent (P less than 0.025. When all the 644 calves in the unit from 23 non-filtered sheds were compared with the 168 calves in the six filtered sheds the reduction in first treatments, repeat courses and total treatments were 19.7 per cent (P less than 0.025), 28.3 per cent (P less than 0.025) and 31.6 per cent (P less than 0.025) respectively. Air filtration was therefore associated with a reduction in both incidence and severity of clinical and subclinical disease in calves. Both treatment for respiratory disease and area of lung consolidation at slaughter were directly related to reductions in daily weight gain. The economic effect of respiratory disease on veal calves is briefly discussed.