Acute lung injury (ALI) is a severe form of hypoxic lung disease responsible for a large number of deaths worldwide. Despite recent advances in supportive care, no reduction in mortality has been evident since the introduction of a standard consensus definition almost two decades ago. New strategies are urgently required to help design effective therapies for this condition. A key pathological feature of ALI involves regional alveolar hypoxia. Because alveolar hypoxia in isolation, such as that encountered at high altitude, causes an inflammatory pulmonary phenotype in the absence of any other pathogenic stimuli, these regions may not be passive bystanders but may actually contribute to the pathogenesis and progression of lung injury. Unique transcriptional responses to hypoxia in the lung apparently allow it to express an inflammatory phenotype at levels of hypoxia that would not produce such a response in other organs. We will review recent advances in our understanding of these unique transcriptional responses to moderate levels of alveolar hypoxia, which may provide new insights into the pathogenesis of ALI.