Chronic alcohol ingestion increases the risk of developing acute respiratory distress syndrome (ARDS), a severe form of acute lung injury, characterized by alveolar epithelial and endothelial barrier disruption and intense inflammation. Alcohol abuse is also associated with a higher incidence of sepsis or pneumonia resulting in a higher rate of admittance to intensive care, longer inpatient stays, higher healthcare costs, and a 2–4 times greater mortality rate. Chronic alcohol ingestion induced severe oxidative stress associated with increased ROS generation, depletion of the critical antioxidant glutathione (GSH), and oxidation of the thiol/disulfide redox potential in the alveolar epithelial lining fluid and exhaled breath condensate. Across intracellular and extracellular GSH pools in alveolar type II cells and alveolar macrophages, chronic alcohol ingestion consistently induced a 40–60 mV oxidation of GSH/GSSG suggesting that the redox potentials of different alveolar GSH pools are in equilibrium. Alcohol-induced GSH depletion or oxidation was associated with impaired functions of alveolar type II cells and alveolar macrophages but could be reversed by restoring GSH pools in the alveolar lining fluid. The aims of this paper are to address the mechanisms for alcohol-induced GSH depletion and oxidation and the subsequent effects in alveolar barrier integrity, modulation of the immune response, and apoptosis.