Pulmonary oxygen toxicity is believed to play a prominent role in the lung injury that leads to the development of bronchopulmonary dysplasia (BPD). To determine whether human recombinant erythropoietin (rhEPO) treatment reduces the risk of developing BPD, we investigated the effect of rhEPO treatment on the histopathologic changes seen in hyperoxia-induced lung injury of BPD. Twenty-five rat pups were divided into four groups: air-exposed control group (n = 5), hyperoxia-exposed placebo group (n = 7), hyperoxia-exposed rhEPO-treated group (n = 6), and air-exposed rhEPO-treated group (n = 7). Measurement of alveolar surface area, quantification of secondary crest formation, microvessel count, evaluation of alveolar septal fibrosis, and smooth muscle actin immunostaining were performed to assess hyperoxia-induced changes in lung morphology. Treatment of hyperoxia-exposed animals with rhEPO resulted in a significant increase in the mean alveolar area, number of secondary crests formed, and the microvessel count in comparison with hyperoxia-exposed placebo-treated animals. There was significantly less fibrosis in rhEPO-treated animals. However, treatment of hyperoxia-exposed animals with rhEPO did not result in a significant change in smooth muscle content compared with hyperoxia-exposed placebo treated animals. Our results suggest treatment with rhEPO during hyperoxia exposure is associated with improved alveolar structure, enhanced vascularity, and decreased fibrosis. Therefore, we conclude that treatment of preterm infants with EPO might reduce the risk of developing BPD.