A spacer assembly for a ventilator or other respiratory equipment for dispensing aerosol drugs from metered dose inhaler (MDI) canisters or nebulized drugs from a nebulizer into a respiratory gas stream delivered from a ventilator or other respiratory equipment connected to a patient. The improvements involve optimizing the shape of the spacer assembly body member and providing an efficient MDI nozzle assembly to allow maximal evaporation of the propellant before the propellant droplets impact the walls of the body member while providing a compact volume for directing the output of an MDI canister or a nebulizer into the gas stream.