The answer is Alveoli.
Alveoli are the terminal part of the respiratory tree and acts as unit of gaseous exchange of the lungs. These are tiny, balloon-shaped air sacs are arranged in clusters throughout the lungs. The barrier between the alveolar space and the pulmonary capillaries is very thin. It allows rapid exchange of gases. The oxygen diffuse into the blood capillaries and the carbon dioxide diffused into the alveolar space from the blood capillaries.
