Previous reports of pulmonary rehabilitation programs have demonstrated improvement in exercise capacity in subjects with disabling pulmonary disease. However, the cost-effectiveness, benefits to outpatients in a community setting, durability of these improvements, and mechanism of improved exercise capacity remain unclear. Forty-four patients with an average FEV1 of 33 +/- 4 percent of predicted completed a six-week long period of supervised treadmill exercise, as well as a continuing home program. Twenty percent had previously unsuspected cardiac disease discovered through the program, while 36 percent had previously unsuspected exercise desaturation. Cardiopulmonary stress testing before and after the program revealed a 73 +/- 16 percent improvement in aerobic capacity (METs peak [power]) and a 250 +/- 78 percent improvement in endurance (MET-min [work]). No significant change was seen in VE max, HR max, FEV1, or the degree of exercise desaturation. Only a small improvement was noted in VO2 max (15 +/- 8 percent) and O2 pulse (16 +/- 8 percent), suggesting that most of the improvement was due to improved muscle efficiency. Follow-up testing at 12 +/- 3 months in 24 subjects revealed that 89 +/- 7 percent of the peak exercise performance was maintained. The cost of the basic program was +800. The results demonstrated that an outpatient community hospital pulmonary rehabilitation program can accomplish substantial exercise capacity improvement with sustained benefits in a cost-effective manner.