Prematurely born infants who require oxygen therapy often develop bronchopulmonary dysplasia (BPD), a debilitating disorder characterized by pronounced alveolar hypoplasia. Hyperoxic injury is believed to disrupt critical signaling pathways that direct lung development, causing BPD. We investigated the effects of normobaric hyperoxia on transforming growth factor (TGF)-beta and bone morphogenetic protein (BMP) signaling in neonatal C57BL/6J mice exposed to 21% or 85% O(2) between postnatal days P1 and P28. Growth and respiratory compliance were significantly impaired in pups exposed to 85% O(2), and these pups also exhibited a pronounced arrest of alveolarization, accompanied by dysregulated expression and localization of both receptor (ALK-1, ALK-3, ALK-6, and the TGF-beta type II receptor) and Smad (Smads 1, 3, and 4) proteins. TGF-beta signaling was potentiated, whereas BMP signaling was impaired both in the lungs of pups exposed to 85% O(2) as well as in MLE-12 mouse lung epithelial cells and NIH/3T3 and primary lung fibroblasts cultured in 85% O(2). After exposure to 85% O(2), primary alveolar type II cells were more susceptible to TGF-beta-induced apoptosis, whereas primary pulmonary artery smooth muscle cells were unaffected. Exposure of primary lung fibroblasts to 85% O(2) significantly enhanced the TGF-beta-stimulated production of the alpha(1) subunit of type I collagen (Ialpha(1)), tissue inhibitor of metalloproteinase-1, tropoelastin, and tenascin-C. These data demonstrated that hyperoxia significantly affects TGF-beta/BMP signaling in the lung, including processes central to septation and, hence, alveolarization. The amenability of these pathways to genetic and pharmacological manipulation may provide alternative avenues for the management of BPD.