A decreased transfer coefficient of the lung for carbon monoxide (K(CO)) is associated with emphysema. We evaluated whether in heavy smokers, baseline K(CO) was associated with the progression of computed tomography (CT)-detected emphysema, and the progression of airflow limitation. Heavy smokers, mean ± sd 41.3 ± 18.7 pack-yrs, participating in a lung cancer screening trial underwent diffusion testing and CT scanning of the lungs. CT scanning was repeated after median (25th-75th percentile) 2.8 (2.7-3.0) yrs and emphysema was assessed by lung densitometry using the 15th percentile. The association between K(CO) at baseline with progression of emphysema and lung function decline was assessed by multiple linear regression, correcting for baseline CT-quantified emphysema severity and forced expiratory volume in 1 s (FEV₁/forced vital capacity (FVC), age, height, body mass index, pack-yrs and smoking status (current or former smoker). 522 participants aged 60.1 ± 5.4 yrs were included. Mean ± sd 15th percentile was -938 ± 19, absolute FEV₁/FVC was 71.6 ± 9% and K(CO) was 1.23 ± 0.25, which is 81.8 ± 16.5% of predicted. By interpolation, a one sd (0.25) lower K(CO) value at baseline predicted a 1.6 HU lower 15th percentile and a 0.78% lower FEV₁/FVC after follow-up (p < 0.001). A lower baseline K(CO) value is independently associated with a more rapid progression of emphysema and airflow limitation in heavy smokers.