Lung disease affects exercise performance through a number of mechanisms, including hypoxemia, abnormal ventilatory mechanics, abnormal ventilatory muscles, abnormal ventilatory patterns, abnormal right heart function and subjective dyspnea. Supplemental oxygen improves hypoxemia and thus improves exercise impairment resulting from hypoxemia-related reductions in oxygen delivery. Supplemental oxygen also reduces exercise ventilation. This, in turn, reduces ventilatory muscle work, and the concomitant permissive hypercapnia may have beneficial effects at the cellular level. Additionally, in obstructive disease patients, an improved ventilatory pattern may reduce air trapping. Supplemental oxygen may also improve right ventricular dysfunction in patients with underlying right ventricular dysfunction. Finally, supplemental oxygen may reduce dyspnea caused by oxygen-related carotid body activity. Important questions remain. First, is long-term oxygen use of benefit in patients with only exercise hypoxemia? Second, is exercise conditioning possible in patients with exercise hypoxemia? Third, does supplemental oxygen enhance exercise conditioning efforts in those patients with CLD but without exercise hypoxemia? If the answer to this last question is yes, what selection criteria should be used to identify those who would benefit? The answers to all of these questions will have enormous impact on our approach to the optimal management of CLD patients.