Chronic respiratory diseases limit exercise capacity, due to breathlessness and hypoxemia. A decrease in daily activity results in impairment of quality of life and higher mortality. Oxygen therapy improves exercise capacity. The main mechanism of this improvement in COPD patients is a reduction in dynamic hyperinflation. The benefits of oxygen therapy is present not only in patients with severe hypoxemia at rest (PaO2 < 60 mm Hg) requiring long-term oxygen therapy, but also in mild hypoxemic patients who develop desaturation during exercise. An improvement in exercise tolerance is proportional to the administered oxygen flow. Provision of oxygen flow from ambulatory source may be continuous or intermittent only during inspiration. Both methods seem to be comparable in terms of improving exercise tolerance and reducing hypoxemia. Ambulatory oxygen should be prescribed to all patients on long-term oxygen therapy who report outdoor activity. Moreover, normoxemic patients with severe exertional desaturation and low exercise tolerance should also be prescribed ambulatory oxygen. The flow of oxygen should be titrated to prevent desaturation during activities. The long-term effects of ambulatory oxygen such as improvement of quality of life and increasing daily activity have not been confirmed and require further investigation.