Performance requirements for automatic transmission fluids have been changed reflecting the design changes of automatic transmissions. The major purpose of these design changes is concentrated upon improvements of both fuel economy and drivability. In order to formulate such high performance ATFs as satisfy those requirements, it is necessary to use high quality base oils like VHVI base oils and PAOs. In this study, the effect of base oils characteristics on ATF performance is investigated, mainly regarding differences in frictional characteristics with deterioration. Frictional characteristics are determined using the SAE No. 2 machine and ATFs are deteriorated under various controlled conditions. Moreover low-temperature fluidity, oxidation stability, and seal compatibility are also compared for four different ATFs. From the investigation, it was found that the use of Group III and IV base oils in ATFs gives several benefits with respect to low temperature viscosity, oxidation stability and SAE No.2 friction characteristics.