Hypoxia impairs normal neonatal pulmonary artery remodeling and alveolar development. Matrix metalloproteinase-2 (MMP-2), which regulates collagen breakdown, is important during development. Our objective was to test the hypothesis that hypoxia attenuates the normal postnatal increase in MMP-2 and evaluate alveolar development and pulmonary arterial remodeling in Mmp2 mice. C57BL/6 wild-type (WT), Mmp2, Mmp2, and MMP-inhibited (with doxycycline) mice were exposed to hypoxia (12% O2) or air from birth to 2 wk of age. Pulmonary arterial remodeling, alveolar development, and vascular collagen and elastin were evaluated. MMP-2 was estimated by quantitative real-time polymerase chain reaction, enzyme-linked immunosorbent assay, immunohistochemistry, and zymography. We observed that 1) in WT mice, hypoxia led to thicker-walled pulmonary arteries and impaired alveolarization, accompanied by decreased MMP-2 and increased tissue inhibitor of metalloproteinases-2 (TIMP-2); 2) Mmp2 mice in air had thicker-walled arteries, impaired alveolarization, and increased perivascular collagen and elastin compared with WT; 3) hypoxia further inhibited alveolarization but did not alter arterial thickening in Mmp2 mice. Mmp2 and MMP-inhibited mice also had thicker-walled arteries than WT in air, but alveolarization was not different. We conclude that hypoxia reduces the postnatal MMP-2 increase in the lung, which may contribute to abnormal pulmonary arterial remodeling and impaired alveolarization. © International Pediatrics Research Foundation, Inc. 2008. All Rights Reserved.