Background: Laparoscopic liver biopsy can be safely performed using local anesthesia and intravenous sedation, but the frequency of hypoxemia is unknown. Methods: We prospectively studied 68 patients undergoing diagnostic laparoscopy and liver biopsy managed by a standard protocol. Results: The mean duration of laparoscopy was 27 ± 5.53 minutes; the mean dose of diamorphine administered was 6.9 ± 2.7 mg; diazepam, 7.05 ± 3.52 mg. The baseline arterial oxygen saturation was 95.6% ± 2.5% and trough was 85% ± 5.1%. A fall of greater than 4% saturation from the baseline occurred in 64 out of 68 patients (94%). The mean decrease in saturation was 10.1% ± 5.4%. An arterial oxygen saturation of less than 85% was seen in 32 patients (47%). There was no correlation between the fall in oxygen saturation and the dose of diamorphine or diazepam, the duration of procedure, body mass index, hemoglobin, or volume of pneumoperitoneum induced. One-way analysis of the variance failed to show a significant relationship between the degree of oxygen saturation and Child's class, etiology of liver disease, or smoking habit. Conclusions: In this study, we demonstrated that significant desaturation is common in diagnostic laparoscopy with liver biopsy and is likely due to a combination of different pharmacologic and physiologic effects. We recommend continuous monitoring of both arterial oxygen saturation and supplemental oxygen for all patients throughout laparoscopy.