Peripheral airway dysfunction, inhomogeneous ventilation distribution, gas trapping, and impaired pulmonary gas exchange are variably present in all stages of chronic obstructive pulmonary disease (COPD). This article provides a cogent physiologic explanation for the relentless progression of activity-related dyspnea and exercise intolerance that all too commonly characterizes COPD. The spectrum of physiologic derangements that exist in smokers with mild airway obstruction and a history compatible with COPD is examined. Also explored are the perceptual and physiologic consequences of progressive erosion of the resting inspiratory capacity. Finally, emerging information on the role of cardiocirculatory impairment in contributing to exercise intolerance in patients with varying degrees of airway obstruction is reviewed.