Bronchopulmonary dysplasia is a chronic lung disease of premature human infancy that shows pathological features comprising varying sized areas of interstitial fibrosis in association with distorted large alveolar spaces. We have previously shown that transfer of active transforming growth factor (TGF)-β1 (AdTGFβ1^223/225) genes by adenovirus vector to embryonic lungs results in inhibition of branching morphogenesis and primitive peripheral lung development, whereas transfer to adult lungs results in progressive interstitial fibrosis. Herein we show that transfer of TGF-β1 to newborn rat pups results in patchy areas of interstitial fibrosis developing throughout a period of 28 days after transfer. These areas of fibrosis appear alongside areas of enlarged alveolar spaces similar to the prealveoli seen at birth, suggesting that postnatal lung development and alveolarization has been inhibited. In rats treated with AdTGFβ1^223/225, enlarged alveolar spaces were evident by day 21, and by 28 days, the mean alveolar cord length was nearly twice that in control vector or untreated rats. Hydroxyproline measurements confirmed the presence of fibrosis. These data suggest that overexpression of TGF-β1 during the critical period of postnatal rat lung alveolarization gives rise to pathological, biochemical, and morphological changes consistent with those seen in human bronchopulmonary dysplasia, thus inferring a pathogenic role for TGF-β in this disorder.