Bronchopulmonary dysplasia (BPD), a chronic lung disease affecting preterm neonates, is associated with significant childhood and adult health problems. Histopathologic features of BPD include impaired vascular and distal airway development. We previously showed that activation of hypoxia-inducible factors (HIFs) by inhibition of prolyl hydroxylase domain-containing proteins (PHDs) is feasible and that it stimulates vascular endothelial growth factor (VEGF)-dependent angiogenesis in vitro. We tested the hypothesis that enhancement of angiogenesis by activation of HIFs improves lung growth and function in prematurely born neonates in vivo. Preterm baboons (125 day+14 day pro re nata O2 model, corresponding to 27 human gestational weeks) were treated for 14 days with intravenous (i.v.) FG-4095, a PHD inhibitor. Notably, 77% of diminished total alveolar surface area in untreated controls was recovered by FG-4095 treatment. Functional significance of the structural changes was indicated by improved oxygenation and lung compliance in FG-4095-treated newborns. Surfactant proteins B and C and saturated phosphatidylcholine were unchanged. Incidence of spontaneous ductus arteriosus closure was increased, likely contributing to lower ratio of pulmonary to systemic blood flow in FG-4095 group. These findings indicate that HIF stimulation by PHD inhibition ameliorates pathological and physiological consequences of BPD.