Partial liquid ventilation (PLV) with perflubron (PFB) has been proposed as an adjunct to the current therapies for the acute respiratory distress syndrome (ARDS). Because PFB has been also referred to as “liquid PEEP,” distributing to the most gravity-dependent regions of the lung, less attention has been paid to the amount of applied positive end-expiratory pressure (PEEP). We hypothesized that higher PEEP levels than currently applied are needed to optimize gas exchange, and that the lower inflection point (LIP) of the pressure–volume curve could be used to estimate the amount of PEEP needed when the lung is filled with PFB. Lung injury was induced in 23 sheep by repeated lung lavage with warmed saline until the PaO2/FiO2 ratio fell below 150. Five sheep were used to investigate the change of the LIP when the lung was filled with PFB in increments of 5 ml/kg/body weight to a total of 30 ml/kg/body weight. To evaluate the impact of PEEP set at LIP + 1 cm H2O we randomized an additional 15 sheep to three groups with different doses (7.5 ml, 15 ml, 30 ml/kg/body weight) of PFB. In random order a PEEP of 5 cm H2O or PEEP at LIP + 1 cm H2O was applied. The LIP decreased with incremental filling of PFB to a minimum at 10 ml (p < 0.05). Increasing PEEP from below LIP to LIP + 1 cm H2O at 15 and 30 ml/kg resulted in an improvement in PaO2 from 152 ± 36 to 203 ± 68 (NS) and 193 ± 57 to 298 ± 80 (p < 0.05), respectively. Pulmonary shunt, and ratio of dead space volume to tidal volume (Vd/Vt) decreased, and static lung compliance increased with PEEP at LIP + 1 cm H2O (p < 0.05). No changes were observed in hemodynamics. We conclude that increasing the dose of PFB shifts the LIP to the left, and that setting PEEP at LIP + 1 cm H2O improves gas exchange at moderate to high doses of PFB.