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Hyperoxia contributes to the development of bronchopulmonary dysplasia in former premature infants. Injurious environmental factors such as hyperoxia may disrupt distal airway branching and alveolar septation, as these critical stages in lung development occur following birth in extremely premature infants. To test if hyperoxia directly inhibited distal airway branching, we cultured E16 fetal mouse lung explants in either 20% (control) or 95% oxygen (hyperoxia). Hyperoxia reduced the number of distal airways to less than 50% of controls. Explants cultured in 95% oxygen also had fewer complex distal airways compared with controls. Mesenchymal cells adjacent to distal airways in hyperoxic explants appeared apoptotic by phase microscopy. Consistent with increased apoptosis, explants cultured in hyperoxia had increased caspase 3/7 activity compared with controls. Hyperoxia also increased mesenchymal caspase 3 expression and annexin V binding within cultured explants as visualized by fluorescence microscopy. We measured increased annexin V binding in isolated primary fetal lung mesenchymal cells cultured in 95% oxygen suggesting a direct effect on cells within the mesenchyme. Hyperoxia can lead to NF-kappaB activation, which mediates inflammatory cascades and may protect cells from apoptosis. We detected NF-kappaB activation and nuclear p65 localization in explants exposed to 48 h of hyperoxia. Inhibition of NF-kappaB prevented the hyperoxia-induced activation of caspase 3. NF-kappaB activation may therefore contribute to apoptosis in the developing fetal mouse lung following hyperoxia exposure. Our data suggest hyperoxia inhibits distal airway branching and directly induces apoptosis of the fetal mouse lung mesenchyme.