Disruption of the alveolar–capillary barrier and accumulation of pulmonary edema, if not resolved, result in poor alveolar gas exchange leading to hypoxia and hypercapnia, which are hallmarks of acute lung injury and the acute respiratory distress syndrome (ARDS). Alveolar fluid clearance (AFC) is a major function of the alveolar epithelium and is mediated by the concerted action of apically-located Na⁺ channels [epithelial Na⁺ channel (ENaC)] and the basolateral Na,K-ATPase driving vectorial Na⁺ transport. Importantly, those patients with ARDS who cannot clear alveolar edema efficiently have worse outcomes. While hypoxia can be improved in most cases by O₂ supplementation and mechanical ventilation, the use of lung protective ventilation settings can lead to further CO₂ retention. Whether the increase in CO₂ concentrations has deleterious or beneficial effects have been a topic of significant controversy. Of note, both low O₂ and elevated CO₂ levels are sensed by the alveolar epithelium and by distinct and specific molecular mechanisms impair the function of the Na,K-ATPase and ENaC thereby inhibiting AFC and leading to persistence of alveolar edema. This review discusses recent discoveries on the sensing and signaling events initiated by hypoxia and hypercapnia and the relevance of these results in identification of potential novel therapeutic targets in the treatment of ARDS.