Background The pathophysiology of COVID-19 remains poorly understood. We aimed to estimate the contribution of intrapulmonary shunting and ventilation-to-perfusion (V_A/Q) mismatch using a mathematical model to construct oxygen-haemoglobin dissociation curves (ODCs). Methods ODCs were constructed using transcutaneous pulse oximetry at two different fractions of inspired oxygen (FiO₂). 199 patients were included from two large district general hospitals in the South East of England from 1^st to 14^th January 2021. The study was supported by the National Institute of Health Research (NIHR) Clinical Research Network. Results Overall mortality was 29%. Mean age was 68.2 years (SEM 1·2) with 46% female. Median shunt on admission was 17% (IQR 8–24.5); V_A/Q was 0.61 (IQR 0.52–0.73). Shunt was 37.5% higher in deaths (median 22%, IQR 9–29) compared to survivors (16%, 8–21; p = 0.0088) and was a predictor of mortality (OR 1.04; 95% CI 1.01–1.07). Admission oxygen saturations were more strongly predictive of mortality (OR 0.91, 95% CI 0.87–0.96). There was no difference in V_A/Q mismatch between deaths (0.60; IQR 0.50–0.73) and survivors (0.61; IQR 0.52–0.73; p = 0.63) and it was not predictive of mortality (OR 0.68; 95% CI 0.18–2.52; p = 0.55). Shunt negatively correlated with admission oxygen saturation (R -0.533; p<0.0001) whereas V_A/Q was not (R 0.1137; p = 0.12). Interpretation Shunt, not V_A/Q mismatch, was associated with worsening hypoxia, though calculating shunt was not of prognostic value. This study adds to our understanding of the pathophysiology of hypoxaemia in COVID-19. Our inexpensive and reliable technique may provide further insights into the pathophysiology of hypoxia in other respiratory diseases.