The present disclosure pertains to a system (10) configured to automatically set the positive end expiratory pressure (PEEP) during mechanical ventilation (800). The system uses a measured relationship between transpulmonary pressure and lung volume (804) to set PEEP (808) such that mechanically assisted breaths are delivered more effectively to open airways (e.g., tidal breaths will be delivered to airways that consist of alveoli that have not contracted or collapsed at the end of expiration) (810). Furthermore, the system is configured to sense (18, 804) when the lungs may be either hyperextended and/or undergoing cyclic atelectasis in order to prevent trauma or injury to the lung's fibrous tissue. The system is configured to perform recruitment and/or continuous monitoring and adjustment of the PEEP setting to maintain an open lung.