© 2019 The Author(s) Phosgene (Carbonyl Chloride, COCl2) remains an important chemical intermediate in many industrial processes such as combustion of chlorinated hydrocarbons and synthesis of solvents (degreasers, cleaners). It is a sweet smelling gas, and therefore does not prompt escape by the victim upon exposure. Supplemental oxygen and ventilation are the only available management strategies. This study was aimed to delineate the pathogenesis and identify novel biomarkers of acute lung injury post exposure to COCl2 gas. Adult male and female C57BL/6 mice (20–25 g), exposed to COCl2 gas (10 or 20 ppm) for 10 min in environmental chambers, had a dose dependent reduction in PaO2 and an increase in PaCO2, 1 day post exposure. However, mortality increased only in mice exposed to 20 ppm of COCl2 for 10 min. Correspondingly, these mice (20 ppm) also had severe acute lung injury as indicated by an increase in lung wet to dry weight ratio, extravasation of plasma proteins and neutrophils into the bronchoalveolar lavage fluid, and an increase in total lung resistance. The increase in acute lung injury parameters in COCl2 (20 ppm, 10 min) exposed mice correlated with simultaneous increase in oxidation of red blood cells (RBC) membrane, RBC fragility, and plasma levels of cell-free heme. In addition, these mice had decreased plasmalogen levels (plasmenylethanolamine) and elevated levels of their breakdown product, polyunsaturated lysophosphatidylethanolamine, in the circulation suggesting damage to cellular plasma membranes. This study highlights the importance of free heme in the pathogenesis of COCl2 lung injury and identifies plasma membrane breakdown product as potential biomarkers of COCl2 toxicity.