Normal neonatal lung growth requires a substantial increase in microvascular endothelial cells. Oxygen injury to neonatal lung destroys endothelial cells and alters the normal process of alveolarization, including development of the microvasculature. The mechanisms that regulate lung alveolar capillary growth and development are not known. Vascular endothelial growth factor (VEGF) is a specific mitogen for endothelial cells that is often expressed by epithelial cells in close proximity to capillary beds. VEGF expression is induced by hypoxia and may be inhibited by hyperoxia. We examined the cell-specific expression of VEGF during normal postnatal lung development and the effects of hyperoxic lung injury on VEGF mRNA and protein in vivo. Normal newborn rabbits between 1 day and 5 wk of age had VEGF transcripts located mainly in alveolar epithelial cells, with little or no VEGF mRNA noted in smooth muscle or endothelial cells. A subpopulation of freshly isolated, normal type II cells, but not mesenchymal cells, expressed VEGF mRNA. Newborn rabbits exposed to 100% oxygen for 4 days had no change in VEGF mRNA abundance, transcript location, or immunostaining. Animals exposed to 100% oxygen for an average of 9 days had an 80% decrease in lung VEGF mRNA abundance, decreased alveolar epithelial cell VEGF expression, and decreased VEGF immunostaining. Recovery of VEGF expression to control levels occurred during a 5-day recovery period. We conclude that alveolar epithelial cells in postnatal lung express VEGF, suggesting epithelial regulation of alveolar capillary formation. Furthermore, hyperoxic injury decreases neonatal lung VEGF mRNA and protein, which may be a contributory mechanism of impaired postnatal microvascular development in oxygen injury.