Bronchopulmonary dysplasia in premature infants is characterized by inhibited alveolarization and vasculogenesis. Our goal was to generate a mouse model of inhibited alveolarization by the administration of an inhibitor of angiogenesis. We then examined the effects of retinoic acid (RA) and erythropoietin (EPO) on alveolar development in this model. Three-day-old mice were injected with a single dose of SU1498 (30 mg/kg, subcutaneously) and either concomitant RA (2 mg/kg, intraperitoneally) or EPO (2,000 IU/kg, subcutaneously) for 10 consecutive days, then harvested on Day 21. Morphometric and electron microscopic analysis, and platelet endothelial cell adhesion molecule (PECAM) immunostaining of endothelial cells, were performed on the lung tissue. In vitro assays were also performed to characterize the effects of RA on endothelial cell growth. Alveolar development was attenuated in the SU1498-treated mice, and electron microscopy demonstrated dilated and dysmorphic capillaries in alveolar walls comparable to previous findings in lungs of infants with bronchopulmonary dysplasia. RA or EPO maintained mean alveolar volume, alveolar surface area, and endothelial cell volume density in the SU1498-treated animals. RA also increased the proliferation of human fetal lung capillary endothelial precursor cells in vitro. These results suggest that the maintenance or growth of the endothelial cell population of the distal lung plays a major role in postnatal alveolar development.