In this study we examined the longitudinal effects of smoke exposure on lung function in a cohort of New Zealand children observed from 9 to 15 yr of age. Possible exposures included in utero exposure from mothers smoking during pregnancy, passive smoke from parents, and active smoking by the children. Lung function measures of forced expiratory volume in one second (FEV1) and vital capacity (VC) were measured biennially and ratios (FEV1/VC) were computed. The data were analyzed using longitudinal methodology, and all subjects with at least one pulmonary function test and responses to the questions concerning smoke exposures were included (n = 634). Subjects reporting wheeze or asthma were examined as a separate subgroup. In the whole cohort, no significant detrimental effects were detected for absolute FEV1 or VC in either sex, related to active or passive smoke exposures. Parental smoking was, however, associated with persistent but mild and nonprogressive impairment of the FEV1/VC ratio in males, an effect that was present at the time lung function measurements were first made. This effect was not seen in females. In children with reported wheeze or asthma, parental smoking had progressive, more serious, and clinically significant effects on the FEV1/VC ratio among adolescents of both sexes, causing a mean reduction in FEV1/VC ratios by age 15 of 3.9% in males and 2.3% in females, in contrast to the observed increase in FEV1/VC ratios with age seen in nonexposed wheezing children. We conclude that passive smoking is a major contributing factor to the development and persistence of airflow limitation in wheezing children.