To evaluate the effect of coal-burning arsenic (As) exposure on lung function and the potential underlying mechanisms, a total of 217 As-exposed subjects and 75 reference subjects were recruited into this study. Hair arsenic (H-As), pulmonary function tests, and serum inflammatory markers CC16, SP-A, MMP-9, and TIMP-1 were evaluated. Residents from As-exposed areas showed higher H-As concentrations (median 0.25 μg/g) than subjects from the reference area (median 0.14 μg/g). Large reductions in lung function parameters were noted in the As-exposed group. A significant negative correlation was observed between H-As concentrations and lung function. Specifically, monotonic negative dose-response relationships were observed between H-As and FEV1(%), FEV1/FVC (%) and FEF75 (%) (all P 0.05), while the associations between H-As and FVC (%), FEF25 (%), and FEF50 (%) were nonlinear (P for nonlinearity = 0.03, 0.001, 0.01, respectively). In addition, there was a direct positive relationship between H-As and the inflammatory response. Alterations in inflammatory biomarkers (CC16, SP-A, MMP-9, and MMP-9/TIMP-1) were significantly associated with As-induced lung function impairment. Thus, this population-based study revealed that As exposure has significant toxic effects on lung function and increased inflammation may occur during this toxic process. We provide scientific evidence for an As-induced alteration in inflammatory biomarkers and pulmonary damage in an As-exposed population. The results of this study can inform risk assessment and risk control processes in relation to human As exposure in coal-burning arsenicosis areas.