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We tested the hypothesis that neostigmine reversal of neuromuscular blockade reduced the incidence of signs and symptoms of postoperative respiratory failure.We enrolled 3,000 patients in this prospective, observer-blinded, observational study. We documented the intraoperative use of neuromuscular blocking agents and neostigmine. At postanesthesia care unit admission, we measured train-of-four ratio and documented the ratio of peripheral oxygen saturation to fraction of inspired oxygen (S/F). The primary outcome was oxygenation at postanesthesia care unit admission (S/F). Secondary outcomes included the incidence of postoperative atelectasis and postoperative hospital length of stay. Post hoc, we defined high-dose neostigmine as more than 60 μg/kg and unwarranted use of neostigmine as neostigmine administration in the absence of appropriate neuromuscular transmission monitoring.Neostigmine reversal did not improve S/F at postanesthesia care unit admission (164 [95% CI, 162 to 164] vs. 164 [161 to 164]) and was associated with an increased incidence of atelectasis (8.8% vs. 4.5%; odds ratio, 1.67 [1.07 to 2.59]). High-dose neostigmine was associated with longer time to postanesthesia care unit discharge readiness (176 min [165 to 188] vs. 157 min [153 to 160]) and longer postoperative hospital length of stay (2.9 days [2.7 to 3.2] vs. 2.8 days [2.8 to 2.9]). Unwarranted use of neostigmine (n = 492) was an independent predictor of pulmonary edema (odds ratio, 1.91 [1.21 to 3.00]) and reintubation (odds ratio, 3.68 [1.10 to 12.4]).Neostigmine reversal did not affect oxygenation but was associated with increased atelectasis. High-dose neostigmine or unwarranted use of neostigmine may translate to increased postoperative respiratory morbidity.