The Zucker diabetic fatty (ZDF fa/fa) rat with genetic leptin insensitivity develops obesity and Type 2 diabetes mellitus (T2DM) with age accompanied by hyperplastic changes in the distal lung (Am J Physiol Lung Cell Mol Physiol 298: L392-L403, 2010). To determine the functional consequences of structural changes, we developed a rebreathing (RB) technique to simultaneously measure lung volume, pulmonary blood flow, lung diffusing capacity (Dl(CO)), membrane diffusing capacity (Dm(CO)), pulmonary capillary blood volume (Vc), and septal tissue volume in anesthetized tracheostomized male ZDF fa/fa and matched lean (+/+) control animals at 4, 8, and 12 mo of age. Results obtained by RB technique were compared with that measured by a single-breath (SB) technique and to that expected in a wide range of species. In fa/fa animals compared with +/+, lung volumes and compliance were 13-35% lower at different ages, and the normal age-related increase in lung compliance was no longer evident. Mean pulmonary blood flow declined with age in fa/fa but not in +/+ animals. Dl(CO) measured at a given pulmonary blood flow was 20-43% lower at different ages due to reductions in both Dm(CO) and Vc. Septal tissue volume was also reduced in older fa/fa rats. We conclude that obese rats with T2DM develop significant restrictive pulmonary defects with diffusion impairment in a pattern similar to that previously reported in obese human subjects with T2DM. Functional impairment became exaggerated with age and duration of T2DM. In both fa/fa and +/+ animals, Dl(CO) measured by RB was systematically higher than by SB technique whereas lung volume was similar, a finding consistent with heterogeneous distribution of ventilation in the rat lung.