Acute lung injury (ALI) is an inflammatory lung disease that manifests itself in patients as acute respiratory distress syndrome and thereby contributes significantly to the morbidity and mortality of patients experiencing critical illness. Even though it may seem counterintuitive, as the lungs are typically well-oxygenated organs, hypoxia signaling pathways have recently been implicated in the resolution of ALI. For example, functional studies suggest that transcriptional responses under the control of the hypoxia-inducible factor (HIF) are critical in optimizing alveolar epithelial carbohydrate metabolism, and thereby dampen lung inflammation during ALI. In the present review we discuss functional roles of oxygenation, hypoxia and HIFs during ALI, mechanisms of how HIFs are stabilized during lung inflammation, and how HIFs can mediate lung protection during ALI.