To determine the effect of moderate altitude on arterial oxygen saturation (SaO2), pulse oximetry was performed on 302 children aged <3 months attending a clinic in Goroka, Eastern Highlands Province (1584 metres above sea level) for minor ailments or immunization. Respiratory and heart rates were also measured. The overall mean SaO2 was 96%. Comparison between log-transformed means showed that SaO2 was significantly lower in the first month of life than later (p=0.04). 6% of SaO2 values were <92%, which is a practical cut-off for normal SaO2 in this population of highland children aged <3 months. Mean respiratory and heart rates were 50/minute and 145/minute, respectively. After adjusting for age, respiratory rate increased significantly as SaO2 declined (p=0.002). We have thus defined reference values for SaO2, respiratory rate and heart rate in healthy young infants residing in the highlands of Papua New Guinea. Further investigation is needed to determine whether SaO2 is lower in babies when they are asleep and to define reference values for older children in the highlands.