Diabetic microangiopathy targets the lung as it does other organs. Even though respiratory dysfunction in most patients with diabetes is subclinical and rarely the presenting complaint, there are several reasons why pulmonary assessment is important: (1) Pulmonary function testing noninvasively quantifies physiological reserves in a large microvascular bed that is not clinically devastated by diabetes. (2) Subclinical loss of pulmonary reserves becomes overtly debilitating under conditions of stress, such as with aging, chronic hypoxia due to lung disease or high altitude exposure, or volume overload secondary to cardiac and renal failure. (3) Unlike myocardial or skeletal muscle function, pulmonary indices are largely independent of physical fitness. (4) Interpretation of pulmonary function indices is not complicated by secondary sequelae of diabetic end-organ failure or prior therapy. Lung function could provide useful measures of the progression of systemic microangiopathy. (5) Chronic use of inhaled insulin may affect long-term pulmonary function, while preexisting pulmonary dysfunction may alter the absorption and bioavailability of inhaled insulin. This review will discuss the changes in lung function observed in diabetes, their underlying mechanisms, and their physiological and clinical implications.