Structural and functional complexities of the mammalian lung evolved to meet a unique set of challenges, namely, the provision of efficient delivery of inspired air to all lung units within a confined thoracic space, to build a large gas exchange surface associated with minimal barrier thickness and a microvascular network to accommodate the entire right ventricular cardiac output while withstanding cyclic mechanical stresses that increase several folds from rest to exercise. Intricate regulatory mechanisms at every level ensure that the dynamic capacities of ventilation, perfusion, diffusion, and chemical binding to hemoglobin are commensurate with usual metabolic demands and periodic extreme needs for activity and survival. This article reviews the structural design of mammalian and human lung, its functional challenges, limitations, and potential for adaptation. We discuss (i) the evolutionary origin of alveolar lungs and its advantages and compromises, (ii) structural determinants of alveolar gas exchange, including architecture of conducting bronchovascular trees that converge in gas exchange units, (iii) the challenges of matching ventilation, perfusion, and diffusion and tissue-erythrocyte and thoracopulmonary interactions. The notion of erythrocytes as an integral component of the gas exchanger is emphasized. We further discuss the signals, sources, and limits of structural plasticity of the lung in alveolar hypoxia and following a loss of lung units, and the promise and caveats of interventions aimed at augmenting endogenous adaptive responses. Our objective is to understand how individual components are matched at multiple levels to optimize organ function in the face of physiological demands or pathological constraints.