Although lifesaving, mechanical ventilation can result in lung injury and contribute to the development of bronchopulmonary dysplasia. The most critical determinants of lung injury are tidal volume and end-inspiratory lung volume. Permissive hypercapnia offers to maintain gas exchange with lower tidal volumes and thus decrease lung injury. Further physiologic benefits include improved oxygen delivery and neuroprotection, the latter through both avoidance of accidental hypocapnia, which is associated with a poor neurologic outcome, and direct cellular effects. Clinical trials in adults with acute respiratory failure indicated improved survival and reduced incidence of organ failure in subjects managed with low tidal volumes and permissive hypercapnia. Retrospective studies in low birth weight infants found an association of bronchopulmonary dysplasia with low PaCO(2). Randomized clinical trials of low birth weight infants did not achieve sufficient statistical power to demonstrate a reduction of BPD by permissive hypercapnia, but strong trends indicated the possibility of important benefits without increased adverse events. Herein, we review the mechanisms leading to lung injury, the physiologic effects of hypercapnia, the dangers of hypocapnia, and the available clinical data.