It is increasingly recognized that adults with preserved ratio impaired spirometry (PRISm) are prone to increased morbidity. However, the underlying pathophysiological mechanisms are unknown. Evaluate the mechanisms of increased dyspnea and reduced exercise capacity in PRISm. We completed a cross-sectional analysis of the CanCOLD (Canadian Cohort Obstructive Lung Disease) population-based study. We compared physiological responses in 59 participants meeting PRISm spirometric criteria (post-bronchodilator FEV  < 80% predicted and FEV /FVC ⩾ 0.7), 264 control participants, and 170 ever-smokers with chronic obstructive pulmonary disease (COPD), at rest and during cardiopulmonary exercise testing. Individuals with PRISm had lower total lung, vital, and inspiratory capacities than healthy controls (all  < 0.05) and minimal small airway, pulmonary gas exchange, and radiographic parenchymal lung abnormalities. Compared with healthy controls, individuals with PRISm had higher dyspnea/Formula: see texto ratio at peak exercise (4.0 ± 2.2 vs. 2.9 ± 1.9 Borg units/L/min;  < 0.001) and lower Formula: see texto (74 ± 22% predicted vs. 96 ± 25% predicted;  < 0.001). At standardized submaximal work rates, individuals with PRISm had greater Vt/inspiratory capacity (Vt%IC;  < 0.001), reflecting inspiratory mechanical constraint. In contrast to participants with PRISm, those with COPD had characteristic small airways dysfunction, dynamic hyperinflation, and pulmonary gas exchange abnormalities. Despite these physiological differences among the three groups, the relationship between increasing dyspnea and Vt%IC during cardiopulmonary exercise testing was similar. Resting IC significantly correlated with Formula: see texto (  = 0.65;  < 0.001) in the entire sample, even after adjusting for airflow limitation, gas trapping, and diffusing capacity. In individuals with PRISm, lower exercise capacity and higher exertional dyspnea than healthy controls were mainly explained by lower resting lung volumes and earlier onset of dynamic inspiratory mechanical constraints at relatively low work rates. Clinical trial registered with www.clinicaltrials.gov (NCT00920348).