Bronchopulmonary dysplasia (BPD) commonly develops in premature infants. An improved understanding of the pathophysiology of BPD requires better models. In this study, neonatal FVB/N mice were exposed to room air or 85% oxygen for 28 days. Neonatal hyperoxia resulted in decreased alveolar septation, increased terminal air space size, and increased lung fibrosis. These changes were evident after 7 days and more pronounced by 28 days. Decreased alveolarization was preceded by decreased proliferation of lung cells. After 3 days of hyperoxia, cell proliferation was decreased compared with room air littermates. Cell proliferation continued to be decreased in the first 2 wk but normalized by 4 wk. Hyperoxia caused an increased number of inflammatory cells in lung tissue and in lung lavage fluid. Analysis of lung tissue RNA by RT-PCR showed that hyperoxia increased expression of the proinflammatory cytokines interleukin-1alpha and macrophage inflammatory protein-1alpha. Prolonged neonatal hyperoxia caused functional changes, decreasing lung volume and pulmonary compliance. We conclude that prolonged exposure of neonatal mice to hyperoxia creates a lesion that is very similar to human BPD and suggests that altered cell proliferation may be important in the pathogenesis of chronic neonatal lung disease.