Lingering breathing difficulties are common after COVID‐19. However, the underlying causes remains unclear, with spirometry often being normal. We hypothesized that small airway dysfunction (SAD) can partly explain these symptoms. We examined 48 individuals (32 women, 4 hospitalized in the acute phase) who experienced dyspnea and/or cough in the acute phase and/or aftermath of COVID‐19, and 22 non‐COVID‐19 controls. Time since acute infection was, median (range), 65 (10–131) weeks. We assessed SAD using multiple breath washout (MBW) and impulse oscillometry (IOS) and included spirometry and diffusing‐capacity test (DLCO). One‐minute‐sit‐to‐stand test estimated physical function, and breathing difficulties were defined as answering “yes” to the question “do you experience lingering breathing difficulties?” Spirometry, DLCO, and IOS were normal in almost all cases (spirometry: 90%, DLCO: 98%, IOS: 88%), while MBW identified ventilation inhomogeneity in 50%. Breathing difficulties (n = 21) was associated with increased MBW‐derived Sacin. However, physical function did not correlate with SAD. Among individuals with breathing difficulties, 25% had reduced physical function, 25% had SAD, 35% had both, and 15% had normal lung function and physical function. Despite spirometry and DLCO being normal in almost all post‐COVID‐19 individuals, SAD was present in a high proportion and was associated with lingering breathing difficulties.