<i>Objective:</i> We examined whether the biophysical and physiological properties of Curosurf^® were improved by the cyclic amphipathic decapeptide polymyxin B (PxB). <i>Methods:</i> Curosurf was diluted to 1–5 mg/ml with PxB added at 1, 2 or 3% (w/w). Albumin was added at 40 mg/ml. Minimum surface tension (γ_min) during surface compression was determined for each mixture with pulsating bubble. Immature newborn rabbits were treated with 2.5 ml/kg of Curosurf 80 mg/ml, or Curosurf 32 mg/ml with or without 2% PxB and ventilated for up to 5 h. <i>Results:</i> At surfactant concentration 2 mg/ml, γ_min was high (17 ± 8.9 mN/m) but remained low (2.7 ± 0.8 mN/m) when PxB was added. Albumin inactivated Curosurf at both 2 and 3.5 mg/ml; this inactivation was prevented by 2% PxB. Treatment of newborn rabbits with Curosurf 80 mg/kg + 2% PxB significantly decreased incidence of pneumothorax in comparison with controls but had no significant effect on lung-thorax compliance or alveolar expansion. <i>Conclusion:</i> Addition of 2% PxB improves surface activity of Curosurf at low concentration, increases its resistance to inactivation by albumin, and reduces the incidence of pneumothorax in immature newborn rabbits undergoing prolonged ventilation.