Transgenic (TG) human (h) extracellular superoxide dismutase (EC-SOD) targeted to type II cells protects postnatal newborn mouse lung development against hyperoxia by unknown mechanisms. Because alveolar development depends on timely proliferation of type II epithelium and differentiation to type I epithelium, we measured proliferation in bronchiolar and alveolar (surfactant protein C-positive) epithelium in air and 95% O2-exposed wild-type (WT) and TG hEC-SOD newborn mice at postnatal days 3, 5, and 7 (P3-P7), traversing the transition from saccular to alveolar stages. We found that TG hEC-SOD ameliorated the 95% O2-impaired bromodeoxyuridine uptake in alveolar and bronchiolar epithelium at P3, but not at P5 and P7, when overall epithelial proliferation rates were lower in air-exposed WT mice. Mouse EC-, CuZn-, and Mn-SOD expression were unaffected by hyperoxia or genotype. TG mice had less DNA damage than 95% O2-exposed WT mice at P3, measured by TdT-mediated dUTP nick end labeling (P < 0.05). Hyperoxia induced cell-cycle inhibitory protein p21cip/waf mRNA at P3, WT > TG, P = 0.06. 95% O2 impaired apical expression of type I cell alpha protein (T1alpha) in WT but not in TG mice at P3 and increased T1alpha in WT and TG mice at P7. Reducing the 95% O2-induced impairment of epithelial proliferation at a critical window of lung development was associated with protection against DNA damage and preservation of apical T1alpha expression at P3.