A physical model for small airway closure is developed, based on the assumption that closure occurs as a result of a surface tension-induced instability of the thin liquid film lining the airways. To distinguish this mechanism from others involving airway compliance, experiments were performed in rigid tubes, 1 mm in diameter, with length-to-diameter ratios between one and ten. Oil was added to the film in small increments and photographed at each stage. For total liquid volumes (V) less than some critical value (Vc) surface tension draws the oil into an axi-symmetric film on the tube walls leaving the lumen relatively unobstructed. When V exceeds Vc, the film becomes unstable and collapses, bridging the lumen and causing obstruction. The ratio of Vc to the tube diameter cubed was found to be approximately 0.7 for the entire range of tube lengths studied. These experimental findings were then used to predict airway closure in a morphometric model of the bronchial tree. Assuming that the liquid film at TLC is 10 microns and that the volume of each airway varies in direct proportion to lung volume, the model predicts that airway closure will first occur in the terminal bronchioles at a lung volume of 23% TLC, in approximate agreement with observed values of residual volume.