Cigarette smoking is the leading cause of preventable death worldwide. It causes chronic lung disease and predisposes individuals to acute lung injury and pulmonary infection. Alveolar macrophages are sentinel cells strategically positioned in the interface between the airway lumen and the alveolar spaces. These are the most abundant immune cells and are the first line of defence against inhaled particulates and pathogens. Recently, there has been a better understanding about the ontogeny, phenotype and function of alveolar macrophages and their role, not only in phagocytosis, but also in initiating and resolving immune response. Many of the functions of the alveolar macrophage have been shown to be dysregulated following exposure to cigarette smoke. While the mechanisms for these changes remain poorly understood, they are important in the understanding of cigarette smoking-induced lung disease. We review the mechanisms by which smoking influences alveolar macrophage: (1) recruitment, (2) phenotype, (3) immune function (bacterial killing, phagocytosis, proteinase/anti-proteinase release and reactive oxygen species production) and (4) homeostasis (surfactant/lipid processing, iron homeostasis and efferocytosis). Further understanding of the mechanisms of cigarette smoking on alveolar macrophages and other lung monocyte/macrophage populations may allow novel ways of restoring cellular function in those patients who have stopped smoking in order to reduce the risk of subsequent infection or further lung injury.