In the last decade, biological drugs have rapidly proliferated and have now become an important therapeutic modality. This is because of their high potency, high specificity and desirable safety profile. The majority of biological drugs are peptide- and protein-based therapeutics with poor oral bioavailability. They are normally administered by parenteral injection (with a very few exceptions). Pulmonary delivery is an attractive non-invasive alternative route of administration for local and systemic delivery of biologics with immense potential to treat various diseases, including diabetes, cystic fibrosis, respiratory viral infection and asthma, etc. The massive surface area and extensive vascularisation in the lungs enable rapid absorption and fast onset of action. Despite the benefits of pulmonary delivery, development of inhalable biological drug is a challenging task. There are various anatomical, physiological and immunological barriers that affect the therapeutic efficacy of inhaled formulations. This review assesses the characteristics of biological drugs and the barriers to pulmonary drug delivery. The main challenges in the formulation and inhalation devices are discussed, together with the possible strategies that can be applied to address these challenges. Current clinical developments in inhaled biological drugs for both local and systemic applications are also discussed to provide an insight for further research.