The lung derives from two distinct embryonic origins, has two separate circulations, undergoes extensive branching morphogenesis, experiences the highest blood flow and the largest continuous distortion among organs due to wide fluctuations in ventilation, perfusion and mechanical stresses. The inflated lung volume consists of about 85% air and 15% cells, fibers, matrix and blood. Both gravitation-dependent and -independent gradients contribute to spatial heterogeneity in structure and function. Dynamic factors such as surface folding, the surfactant layer, and capillary erythrocytes distribution greatly influence the physical properties of the organ. These unique features pose challenges for the optimization of lung function in health and disease. Oxygen uptake across the lung begins with O₂ flow into the lungs via negative pressure generated by diaphragm contraction, followed by convective distribution among airways, diffusive distribution within intra-acinar air spaces and across the blood-gas barrier, diffusion across plasma and capillary erythrocyte membrane and finally chemical reaction with hemoglobin. Efficiency of O₂ transfer depends on appropriate matching between diffusion interfaces, allosteric interaction with hemoglobin, and regulation of hematological volumes and flow. This chapter briefly reviews: 1. Structural determinants of gas exchange. 2. Physiological determinants of gas exchange, including distributive and diffusive factors, the methods of measurement and interpretation of results. 3. Arterial oxygen homeostasis, including optimization of alveolar-arterial O₂ tension gradient during exercise via regulation of hematological volumes and allosteric control of the oxyhemoglobin dissociation curve.