In dipped (splash) lubrication, a rotating component, such as a gear, is partly submerged in a reservoir of liquid lubricant and acts to distribute it within the lubricated machine. Dipped lubrication is widely used for low to medium speed applications in the industrial and automotive sectors and there is a significant interest in the associated energy loss (the “churning” loss) because of its influence on efficiency and fuel consumption. In this study, a simple test rig consisting of a spur gear rotating in a cylindrical enclosure, partly filled with a liquid, was used to study the effect of fluid properties on the churning loss. The inertia rundown method was used to determine the power losses. Lubricating oils, water and aqueous glycerol solutions were among the fluids used. Correlations with Froude and Reynolds and Bond numbers are presented. It was found that the churning losses were significantly affected by the fluid disposition within the housing. In turn this was affected by the ratio of inertial forces to gravity (Froude number) and by air pressure. The influence of the pressure of the air within the enclosure was also investigated. When the air was evacuated from the enclosure, the churning losses increased, by a factor of up to 4.5 times. This can be explained by the effect of air (windage and aeration) on the liquid disposition, factors neglected in most previous work.