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In response to the growing industry interest in environmentally acceptable (EA) lubricants, a hydraulic oil development program was initiated with these express objectives: Define the environmental impact and performance expectations for a lubricant used in applications where inadvertent leakage to the environment may occur. Develop a new product which degrades rapidly and is nontoxic to fish while providing satisfactory field performance in severe applications. This paper will first review the current regulatory initiatives and proposed ecotox test requirements for this class of lubricant. In addition, ecotox data for the candidate fluids will be presented along with recommendations aimed at more clearly defining the test requirements and limits. Lubricant performance data, including laboratory evaluation and field experience, for a vegetable-based hydraulic fluid will be presented, identifying both performance strengths and weaknesses.