Pregnancy in women with diabetes is associated with a higher risk of perinatal complications. In particular, infants of diabetic mothers frequently suffer from respiratory distress syndrome (RDS), which is a leading cause of death in preterm infants and is considered to be primarily due to hyperinsulinemia in infants in response to maternal hyperglycemia. To elucidate the mechanism of how insulin signaling induces RDS, bronchoalveolar epithelium-specific Akt1 transgenic (TG) mice were generated. Akt1 overexpression in fetal lung epithelium resulted in RDS in preterm infants born by Caesarean section at embryonic day 18.5 (E18.5). The expression levels of hypoxia-inducible factor 2α (HIF-2α) and its target vascular endothelial growth factor (VEGF) were downregulated in the lung of Akt1 TG mice. Inhibition of the Akt-mammalian target of rapamycin (mTOR) signaling axis by rapamycin restored the expression of VEGF and improved the lung pathology of Akt1 TG pups. Rapamycin also attenuated the RDS phenotype in wild-type mice delivered preterm at E17.5. In cultured lung epithelial cells, insulin reduced VEGF expression and transcriptional activity of HIF-2 on VEGF promoter in an mTOR-dependent manner. Thus, aberrant activation of the Akt-mTOR pathway in lung epithelium plays a causal role in the pathogenesis of infant RDS, presumably through downregulation of HIF-2-dependent VEGF expression in the lung.