Cyclooxygenase-2 (COX-2/PTGS2) mediates hyperoxia-induced impairment of lung development in newborn animals and is increased in the lungs of human infants with bronchopulmonary dysplasia (BPD). COX-2 catalyzes the production of cytoprotective prostaglandins, such as prostacyclin (PGI2), as well as proinflammatory mediators, such as thromboxane A2. Our objective was to determine whether iloprost, a synthetic analog of PGI2, would attenuate hyperoxia effects in the newborn mouse lung. To test this hypothesis, newborn C57BL/6 mice along with their dams were exposed to normoxia (21% O2) or hyperoxia (85% O2) from 4 to 14 days of age in combination with daily intraperitoneal injections of either iloprost 200 μg·kg-1·day-1, nimesulide (selective COX-2 antagonist) 100 mg·kg-1·day-1, or vehicle. Alveolar development was estimated by radial alveolar counts and mean linear intercepts. Lung function was determined on a flexiVent, and multiple cytokines and myeloperoxidase (MPO) were quantitated in lung homogenates. Lung vascular and microvascular morphometry was performed, and right ventricle/left ventricle ratios were determined. We determined that iloprost (but not nimesulide) administration attenuated hyperoxia-induced inhibition of alveolar development and microvascular density in newborn mice. Iloprost and nimesulide both attenuated hyperoxia-induced, increased lung resistance but did not improve lung compliance that was reduced by hyperoxia. Iloprost and nimesulide reduced hyperoxia-induced increases in MPO and some cytokines (IL-1β and TNF-α) but not others (IL-6 and KC/Gro). There were no changes in pulmonary arterial wall thickness or right ventricle/left ventricle ratios. We conclude that iloprost improves lung development and reduces lung inflammation in a newborn mouse model of BPD.