It has been known for some time that healthy Tibetans born and raised on the high plateau (about 4300m) display a range of hemoglobin values that vary from those of normal Caucasians at sea level (~15-17g/dl) to frankly polycythemic (greater than 20g/dl). Genetic studies of this population have revealed that the apparent loss of altitude-related polycythemic response in those Tibetans without polycythemia is associated with mutations causing down-regulation of hypoxia-sensitive genes, in particular those of the HIF family. Moreover, genetic analysis suggests this is of adaptive benefit, but if so, and how from a physiological standpoint, has not been tested. In a group of 21 healthy Tibetan males with similar daily activities and [Hb] ranging from 16 to 23 g/dl, those with lower [Hb] were able to reach a higher VO2peak/kg (at 4300m) than those with high [Hb]. Multivariate analysis showed that this was almost fully explained by a combination of higher cardiac output (QT) and greater muscle diffusing capacity for O2 (DMO2). On the other hand, indices reflecting lung structure and function, such as arterial PO2, PCO2 and AaPO2 difference during peak exercise, and lung volumes and flow rates at rest, did not vary as a function of [Hb] and did not contribute statistically to variance in peak VO2. That those with lower [Hb] not just matched but exceeded their higher [Hb] counterparts in exercise capacity suggests that QT and DMO2 enhancement may be the primary adaptive physiological change, and not compensatory to the lower [Hb]. Both the physiological and genetic underpinnings of these observations remain to be investigated.