Deep groundwater contains dissolved gases that may come out of solution if the water pressure is lowered. Water pressures are often decreased down to atmospheric pressure when water is withdrawn from deep boreholes and drifts in the bedrock, for example, in investigations regarding nuclear waste disposal. Groundwater degassing may then contribute to the development of a local, unsaturated zone around the borehole or drift, which may affect inflow and, as a consequence, the outcome of hydraulic and tracer tests in fractured rock. Laboratory experiments with gas-saturated water in rock fracture replicas have demonstrated that degassing causes considerable hydraulic conductivity reduction under certain conditions. Degassing has also been hypothesized to be the cause of observed flow reductions in the field; however, supporting field experiments have so far been lacking. We report results that constitute the first field support of the development of an unsaturated zone and, as a consequence, hydraulic conductivity reduction due to groundwater degassing around a borehole. The borehole tests were conducted approximately 450 m below the groundwater table at the ¿sp¿ Hard Rock Laboratory in southeastern Sweden. No hydraulic conductivity reductions were observed at gas contents of about 1%, whereas a 50% reduction in hydraulic conductivity was observed at a gas content of 13%. Formal hypothesis testing, based on all available field and laboratory degassing tests, supports degassing as the actual cause of the observed hydraulic conductivity reduction at the higher gas content. We also show analytically that hydraulic conductivity reductions due to degassing may occur at much lower gas contents around drifts than around boreholes. ¿ 2000 American Geophysical Union