Although oxygen dissolves in the blood, only a small amount of oxygen is transported this way. Only 1.5 percent of oxygen in the blood is dissolved directly into the blood itself. Most oxygen, 98.5 percent, is bound to a protein called hemoglobin and carried to the tissues.

Hemoglobin, or Hb, is a protein molecule found in red blood cells (erythrocytes) made of four subunits: two alpha subunits and two beta subunits. Each subunit surrounds a central heme group that contains iron and binds one oxygen molecule, allowing each hemoglobin molecule to bind four oxygen molecules. Molecules with more oxygen bound to the heme groups are brighter red. As a result, oxygenated arterial blood where the Hb is carrying four oxygen molecules is bright red, while venous blood that is deoxygenated is a darker red.

It is easier to bind a second and third oxygen molecule to Hb than the first molecule. This is because the hemoglobin molecule changes its shape, or conformation, as oxygen binds. The fourth oxygen is then more difficult to bind. The binding of oxygen to hemoglobin can be plotted as a function of the partial pressure of oxygen in the blood (x-axis) versus the relative Hb-oxygen saturation (y-axis). The resulting graph, an oxygen dissociation curve, is sigmoidal, or S-shaped. As the partial pressure of oxygen increases, the hemoglobin becomes increasingly saturated with oxygen.

The oxygen-carrying capacity of hemoglobin determines how much oxygen is carried in the blood. In addition, other environmental factors and diseases can also affect oxygen-carrying capacity and delivery. When carbon dioxide is in the blood, it reacts with water to form bicarbonate (HCO₃⁻) and hydrogen ions (H⁺). As the level of carbon dioxide in the blood increases, more H⁺ is produced and the pH decreases. The increase in carbon dioxide and subsequent decrease in pH reduce the affinity of hemoglobin for oxygen. The oxygen dissociates from the Hb molecule, shifting the oxygen dissociation curve to the right. Therefore, more oxygen is needed to reach the same hemoglobin saturation level as when the pH was higher. This occurs at high altitudes, where the oxygen pressure is especially low.

A similar shift in the curve also results from an increase in body temperature. Increased temperature, such as from increased activity of the skeletal muscle, causes the affinity of hemoglobin for oxygen to be reduced. Hemoglobin in babies is known as fetal hemoglobin and this has a higher affinity for oxygen so it is able to bind it from the mother hemoglobin.  In the muscles and organs, myoglobin binds oxygen tighter than hemoglobin.

To measure the percentage of red blood cells in a sample of blood we can conduct a hematocrit test which measures the percentage of RBCs in a blood sample. It is performed by spinning the blood sample in a specialized centrifuge, a process that causes the heavier elements suspended within the blood sample to separate from the lightweight, liquid plasma. Because the heaviest elements in blood are the erythrocytes, these settle at the very bottom of the hematocrit tube. Located above the erythrocytes is a pale, thin layer composed of the remaining formed elements of blood. These are the WBCs, clinically known as leukocytes, and the platelets, cell fragments also called thrombocytes. Above this is the blood plasma, normally a pale, straw-colored fluid, which constitutes the remainder of the sample.