The initiation of ventilation in preterm, surfactant-deficient sheep without positive end-expiratory pressure (PEEP) causes airway injury and lung inflammation. We hypothesized that PEEP and surfactant treatment would decrease the lung injury from initiation of ventilation with high tidal volumes. Fetal sheep at 128-day gestational age were randomized to ventilation with: 1) no PEEP, no surfactant; 2) 8-cmH(2)O PEEP, no surfactant; 3) no PEEP + surfactant; 4) 8-cmH(2)O PEEP + surfactant; or 5) control (2-cmH(2)O continuous positive airway pressure) (n = 6-7/group). After maternal anesthesia and hysterotomy, the head and chest were exteriorized, and the fetus was intubated. While maintaining placental circulation, the fetus was ventilated for 15 min with a tidal volume escalating to 15 ml/kg using heated, humidified, 100% nitrogen. The fetus then was returned to the uterus, and tissue was collected after 30 min for evaluation of early markers of lung injury. Lambs receiving both surfactant and PEEP had increased dynamic compliance, increased static lung volumes, and decreased total protein and heat shock proteins 70 and 60 in bronchoalveolar lavage fluid compared with other groups. Ventilation, independent of PEEP or surfactant, increased mRNA expression of acute phase response genes and proinflammatory cytokine mRNA in the lung tissue compared with controls. PEEP decreased mRNA for cytokines (2-fold) compared with groups receiving no PEEP. Surfactant administration further decreased some cytokine mRNAs and changed the distribution of early growth response protein-1 expression. The use of PEEP during initiation of ventilation at birth decreased early mediators of lung injury. Surfactant administration changed the distribution of injury and had a moderate additive protective effect.