how the respiratory system works: Inhalation: You breathe in air through your nose or mouth. The air passes through the nasal cavity, where it is warmed, humidified, and filtered. It then travels down the pharynx and into the larynx. Gas exchange: The air travels down the trachea and into the bronchi, which branch off into smaller and smaller airways called bronchioles. These eventually lead to the alveoli, tiny sacs in the lungs where gas exchange takes place. Oxygen diffuses from the alveoli into the bloodstream, while carbon dioxide diffuses from the bloodstream into the alveoli. Exhalation: You breathe out air through your nose or mouth. The air travels back up the airways and out of the body.