Environmentally acceptable hydraulic fluids are increasingly specified for use in hydraulic equipment working in environmentally sensitive areas. This paper describes the research methodology that was used to develop a high performance synthetic, environmentally acceptable hydraulic fluid. Product development consisted of: (1) setting the standards for environmental acceptability, (2) screening base fluids and additives for technical performance and minimal impact on the environment, (3) designing a formulation to meet these targets and (4) field experience. Test results demonstrating the high performance and low environmental impact of the new fluid are discussed.A key challenge when formulating an environmentally acceptable hydraulic fluid is to achieve satisfactory oxidation stability. The absence of a suitable oxidation stability test, which can differentiate between environmentally acceptable fluids and correlate with field performance, has been an issue for several years. This paper therefore also discusses the usefulness of a modified version of the Turbine Oil Stability Test (TOST) as a discriminator between environmentally acceptable formulations and as a predictor of performance in actual hydraulic equipment.