Significant changes are occurring in the development of automatic transmission fluids (ATF) which impact the selection of both additive components and lubricant base oils. In particular, the need for improved viscometrics at high and low temperatures, combined with the need for increased oxidation performance and shear stability are moving formulators towards use of higher quality API Group II (100 - 120 VI) and/or Group III base oils.Several benefits are apparent with the use of API Group III base oils in ATF. Their naturally high Viscosity Index of >120 provides opportunities to use a higher base oil viscosity compared to API Group I and in many instances Group II base oils. This reduces the amount of Viscosity Modifier in the finished ATF and improves overall shear stability. Higher kinematic viscosity also improves volatility which leads to improved oxidation resistance.Low temperature fluidity can be improved by modifying the amount and type of residual wax in the base oil. This is achieved through two main factors, namely: (i) feed selection and (ii) the type of dewaxing process, isodewaxing being preferred to conventional solvent dewaxing. Finally, the higher concentration of saturated versus aromatic molecules in an API Group II and Group III base oil provide enhanced antioxidant response.The relationship between base oil composition and ATF performance will be discussed in terms of low temperature Brookfield viscosity, shear stability and oxidation performance. Particular emphasis will be given to API Group II+ and Group III base oils produced by severe hydro-treating and isodewaxing.