The long-term effect of diaphragm paralysis on respiratory system function is still not clear. We monitored changes in breathing pattern and the sleep/wake cycle in a dog before and after bilateral phrenicotomy. The post-operative observation extended over 6 months. It was noted that minute ventilation increased during wakefulness and non-REM sleep in the initial 4-6 weeks (compared to pre-surgery period), but decreased during REM sleep, mainly due to inhibition of chest wall and abdominal muscles. These episodes resulted in hypoxemia and frequent arousals. Following this period, there was a restructuring of REM sleep, increasing the frequency of REM sleep and reducing the duration of each REM sleep episode. In addition, the enhanced activity of parasternal and abdominal muscles was persistently seen during REM sleep. These changes in breathing and sleep provided stable ventilation during sleep. We conclude that bilateral phrenicotomy restructures breathing and alters sleep/wake cycle to prevent nocturnal hypoxemia. The mechanisms underlying these changes may reflect plasticity in the control of breathing and REM sleep.