Pulmonary edema is a problem of major clinical importance resulting from a persistent imbalance between forces that drive water into the airspace of the lung and the biological mechanisms for its removal. Here, we will review the fundamental mechanisms implicated in the regulation of alveolar fluid homeostasis. We will then describe the perturbations of pulmonary fluid homeostasis implicated in the pathogenesis of pulmonary edema in conditions associated with increased pulmonary capillary pressure, namely cardiogenic pulmonary edema and high-altitude pulmonary edema (HAPE), with particular emphasis on the latter that has provided important new insight into underlying mechanisms of pulmonary edema. We will provide evidence that impaired pulmonary endothelial and epithelial nitric oxide synthesis and/or bioavailability may represent a central underlying defect predisposing to exaggerated hypoxic pulmonary vasoconstriction, and, in turn, capillary stress failure and alveolar fluid flooding. We will then demonstrate that exaggerated pulmonary hypertension, while possibly a prerequisite, may not always be sufficient to cause HAPE, and how defective alveolar fluid clearance may represent a second important pathogenic mechanism. Finally, we will outline, how this new insight gained from studies in HAPE, may be translated into the management of pulmonary edema and hypoxemia related disease states in general.