Despite modern clinical practice in critical care medicine, acute lung injury still causes unacceptably high rates of morbidity and mortality. Therefore, the challenge today is to identify new and effective strategies in order to improve the outcome of these patients. Carbon monoxide, endogenously produced by the heme oxygenase enzyme system, has emerged as promising gaseous therapeutic that exerts protective effects against inflammation, oxidative and mechanical stress, and apoptosis, thus potentially limiting acute lung injury. In this review we discuss the effects of inhaled carbon monoxide on acute lung injury that results from ischemia-reperfusion, transplantation, sepsis, hyperoxia, or mechanical ventilation, the latter referred to as ventilator-induced lung injury. Multiple investigations using in vivo and in vitro models have demonstrated anti-inflammatory, anti-apoptotic, and anti-proliferative properties of carbon monoxide in the lung when applied at low dose prior to or during stressful stimuli. The molecular mechanisms that are modulated by carbon monoxide exposure are still not fully understood. Carbon monoxide mediated lung protection involves several signaling pathways including mitogen activated protein kinases, nuclear factor-κB, activator protein-1, Akt, peroxisome proliferating- activated receptor-γ, early growth response-1, caveolin-1, hypoxia-inducible factor-1α, caspases, Bcl-2-family members, heat shock proteins, or molecules of the fibrinolytic axis. At present, clinical trials on the efficacy and safety of CO investigate whether the promising laboratory findings might be translatable to humans.