This study investigated whether hypoxia-inducible factor (HIF)-1 influences postnatal vascularization and alveologenesis in mice and whether stable (constitutive-active) HIF could prevent hyperoxia-induced lung injury. We assessed postnatal vessel and alveolar formation in transgenic mice, expressing a stable, constitutive-active, HIF1α-subunit (HIF-1αΔODD) in the distal lung epithelium. In addition, we compared lung function, histology, and morphometry of neonatal transgenic and wild-type mice subjected to hyperoxia. We found that postnatal lungs of HIF-1αΔODD mice had a greater peripheral vessel density and displayed advanced alveolarization compared with control lungs. Stable HIF-1α expression was associated with increased postnatal expression of angiogenic factors, including vascular endothelial growth factor, angiopoietins 1 and 2, Tie2, and Ephrin B2 and B4. Hyperoxia-exposed neonatal HIF-1αΔODD mice exhibited worse lung function but had similar histological and surfactant abnormalities compared with hyperoxia-exposed wild-type controls. In conclusion, expression of constitutive-active HIF-1α in the lung epithelium was associated with increased postnatal vessel growth via up-regulation of angiogenic factors. The increase in postnatal vasculature was accompanied by enhanced alveolar formation. However, stable HIF-1α expression in the distal lung did not prevent hyperoxia-induced lung injury in neonates but instead worsened lung function.