Chronic obstructive pulmonary disease (COPD) and lung cancer are leading cause of death, and both are associated with cigarette smoke exposure. It has been shown that 50-70% of patients diagnosed with lung cancer suffer from COPD, and reduced lung function is an important event in lung cancer suggesting an association between COPD and lung cancer. However, a causal relationship between COPD and lung tumorigenesis is not yet fully understood. Recent studies have suggested a central role of chronic inflammation in the pathogenesis of both the diseases. For example, immune dysfunction, abnormal activation of NF-kappaB, epithelial-to-mesenchymal transition, altered adhesion signaling pathways, and extracellular matrix degradation/altered signaling are the key underlying mechanisms in both COPD and lung cancer. These parameters along with other processes, such as chromatin modifications/epigenetic changes, angiogenesis, and autophagy/apoptosis are altered by cigarette smoke, are crucial in the development of COPD and lung cancer. Understanding the cellular and molecular mechanisms underlying these processes will provide novel avenues for halting the chronic inflammation in COPD and devising therapeutic strategies against lung cancer.