To facilitate the proposed use of graphene and its derivative graphene oxide (GO) in widespread applications, we explored strategies that improve the biocompatibility of graphene nanomaterials in the lung. In particular, solutions of aggregated graphene, Pluronic dispersed graphene, and GO were administered directly into the lungs of mice. The introduction of GO resulted in severe and persistent lung injury. Furthermore, in cells GO increased the rate of mitochondrial respiration and the generation of reactive oxygen species, activating inflammatory and apoptotic pathways. In contrast, this toxicity was significantly reduced in the case of pristine graphene after liquid phase exfoliation and was further minimized when the unoxidized graphene was well-dispersed with the block copolymer Pluronic. Our results demonstrate that the covalent oxidation of graphene is a major contributor to its pulmonary toxicity and suggest that dispersion of pristine graphene in Pluronic provides a pathway for the safe handling and potential biomedical application of two-dimensional carbon nanomaterials.