When alveoli are inflated, the stretched alveolar walls draw their capillaries into oval cross sections. This causes the disk-shaped red blood cells to be oriented near alveolar gas, thereby minimizing diffusion distance. We tested these ideas by measuring red blood cell orientation in histological slides from rapidly frozen rat lungs. High lung inflation did cause the capillaries to have oval cross sections, which constrained the red blood cells within them to flow with their broad sides facing alveolar gas. Low lung inflation stretched alveolar walls less and allowed the capillaries to assume a circular cross section. The circular luminal profile permitted the red blood cells to have their edges facing alveolar gas, which increased the diffusion distance. Using a finite-element method to calculate the diffusing capacity of red blood cells in the broad-side and edge-on orientations, we found that edge-on red blood cells had a 40% lower diffusing capacity. This suggests that, when capillary cross sections become circular, whether through low-alveolar volume or through increased microvascular pressure, the red blood cells are likely to be less favorably oriented for gas exchange.