Purpose: The aim of the study was to review the authors' experience with alveolar capillary dysplasia (ACD), a cause of persistent pulmonary hypertension of the neonate (PPHN) caused by decreased alveolar units, dilated anomalous pulmonary veins, thick-walled arterioles, and thickened interalveolar septa. Methods: The records of all neonates with ACD were reviewed from Children's Hospital, Columbus, Ohio, and Sophia's Children's Hospital, Rotterdam, The Netherlands. The clinical characteristics and pathological findings are discussed. Results: Eight neonates were diagnosed with ACD from 1994 to 2002. Twenty-five percent (2/8) experienced respiratory distress immediately after birth, whereas 75% (6/8) had normal Apgar scores but deteriorated 1.5 hours to 30 days after birth. All infants required conventional ventilation initially; 50% (4/8) were placed on high-frequency oscillating ventilation and 87% (7/8) on extracorporeal membrane oxygenation. A premorbid diagnosis was established in 3 patients by open lung biopsy. The diagnosis of ACD was confirmed at autopsy in all patients. Conclusions: ACD is a fatal disease that should be suspected in all neonates with respiratory failure and PPHN who fail conventional therapy. Prompt diagnosis helps to avoid prolongation of costly treatment modalities in a uniformly fatal disease. An algorithm is proposed in which neonates with PPHN who fail treatment with extracorporeal membrane oxygenation are managed by open lung biopsy.