Oxygen therapy using mechanical ventilation with hyperoxia is necessary to treat patients with respiratory failure and distress. However, prolonged exposure to hyperoxia leads to the generation of excessive reactive oxygen species (ROS), causing cellular damage and multiple organ dysfunctions. As the lungs are directly exposed, hyperoxia can cause both acute and chronic inflammatory lung injury and compromise innate immunity. ROS may contribute to pulmonary oxygen toxicity by overwhelming redox homeostasis, altering signaling cascades that affect cell fate, ultimately leading to hyperoxia-induced acute lung injury (HALI). HALI is characterized by pronounced inflammatory responses with leukocyte infiltration, injury, and death of pulmonary cells, including epithelia, endothelia, and macrophages. Under hyperoxic conditions, ROS mediate both direct and indirect modulation of signaling molecules such as protein kinases, transcription factors, receptors, and pro- and anti-apoptotic factors. The focus of this review is to elaborate on hyperoxia-activated key sensing molecules and current understanding of their signaling mechanisms in HALI. A better understanding of the signaling pathways leading to HALI may provide valuable insights on its pathogenesis and may help in designing more effective therapeutic approaches.