Background: In non-cystic fibrosis bronchiectasis, small airway airflow limitation is primarily driven by mucus plugging, chronic neutrophilic inflammation, and epithelial injury. These primary mechanisms lead to subsequent airway remodelling and luminal narrowing. Such functional impairment is clinically significant, as a reduced distance–saturation product (DSP) of <280 m% during the 6-minute walk test (6MWT) is associated with increased mortality. Objective: To evaluate the association between small airway dysfunction (SAD), exercise-induced desaturation (EID), and impaired exercise capacity in patients with bronchiectasis. Design: A retrospective, cross-sectional study. Methods: This retrospective study included 114 patients with bronchiectasis (non-desaturators, n = 57; desaturators, n = 57) and 53 non-bronchiectasis controls. Impulse oscillometry (IOS), spirometry, and 6MWT data were analysed. Desaturators were defined as a maximal decline in peripheral oxygen saturation (ΔSpO 2 ) ≤ −4% during the 6MWT. Results: Compared with bronchiectasis non-desaturators (n = 57), desaturators (n = 57) exhibited more pronounced IOS-defined SAD, characterised by higher R 5 –R 20 , F res , and A X , and lower X 5 , as well as spirometry-defined SAD with lower MMEF%pred and FEF50%pred. Desaturators also demonstrated a shorter 6-minute walk distance (6MWD). Greater R 5 –R 20 , F res , and A X , and lower X 5 , MMEF%pred, and FEF50%pred were associated with a larger reduction in ΔSpO 2 , shorter 6MWD, and lower DSP. The multiple linear regression showed age, BRICS, and R 5 -R 20 are independent predictors for DSP. Among them, R 5 -R 20 (β=-0.345) is a stronger predictor than BRICS (β=-0.285) for DSP. Conclusion: SAD is independently associated with EID and reduced exercise capacity in bronchiectasis, highlighting its potential role as a functional marker beyond structural disease severity.