Acute lung injury (ALI) and acute respiratory distress syndrome (ARDS) remain major causes of morbidity and mortality in critical care medicine despite advances in therapeutic modalities. ALI can be associated with sepsis, trauma, pharmaceutical or xenobiotic exposures, high oxygen therapy (hyperoxia) and mechanical ventilation. The stress protein heme oxygenase-1 (HO-1) provides an inducible defense mechanism that can protect lung cells and tissues against injury. HO-1 degrades heme to biliverdin-IXalpha, carbon monoxide (CO), and iron. Each of these reaction products has been implicated in the cytoprotection associated with HO-1 expression. At low concentrations, CO can confer cyto-protective and tissue-protective effects involving the inhibition of inflammatory, proliferative, and apoptotic signaling. Lung protection by HO-1 has been demonstrated in vitro and in vivo in several models of experimental ALI and sepsis. Recent studies have also explored the protective effects of pharmacological or inhalation CO therapy in animal models of ALI/sepsis. CO has shown therapeutic potential in models of oxidative and acid-induced lung injury, ventilator-induced lung injury, endotoxin challenge, and cecal-ligation and puncture induced-sepsis. Despite therapeutic benefit in animal model studies, the efficacy of CO in humans with these conditions remains unclear, and awaits further controlled clinical studies. This review will summarize recent findings on the therapeutic applications of HO-1 and its end-product CO in the lung, with an emphasis on lung injury models relevant to critical care medicine.