Gases are sensed by lung cells and can activate specific intracellular signalling pathways, and thus have physiological and pathophysiological effects. Carbon dioxide (CO₂), a primary product of oxidative metabolism, can be sensed by eukaryotic cells eliciting specific responses via recently identified signalling pathways. However, the physiological and pathophysiological effects of high CO₂ (hypercapnia) on the lungs and specific lung cells, which are the primary site of CO₂ elimination, are incompletely understood. In this review, we provide a physiological and mechanistic perspective on the effects of hypercapnia on the lungs and discuss the recent understanding of CO₂ modulation of the alveolar epithelial function (lung oedema clearance), epithelial cell repair, innate immunity and airway function.