Mechanical ventilation (MV) with O(2)-rich gas (MV-O(2)) offers life-saving treatment for newborn infants with respiratory failure, but it also can promote lung injury, which in neonates translates to defective alveolar formation and disordered lung elastin, a key determinant of lung growth and repair. Prior studies in preterm sheep and neonatal mice showed that MV-O(2) stimulated lung elastase activity, causing degradation and remodeling of matrix elastin. These changes yielded an inflammatory response, with TGF-β activation, scattered elastic fibers, and increased apoptosis, culminating in defective alveolar septation and arrested lung growth. To see whether sustained inhibition of elastase activity would prevent these adverse pulmonary effects of MV-O(2), we did studies comparing wild-type (WT) and mutant neonatal mice genetically modified to express in their vascular endothelium the human serine elastase inhibitor elafin (Eexp). Five-day-old WT and Eexp mice received MV with 40% O(2) (MV-O(2)) for 24-36 h. WT and Eexp controls breathed 40% O(2) without MV. MV-O(2) increased lung elastase and MMP-9 activity, resulting in elastin degradation (urine desmosine doubled), TGF-β activation (pSmad-2 increased 6-fold), apoptosis (cleaved-caspase-3 increased 10-fold), and inflammation (NF-κB activation, influx of neutrophils and monocytes) in lungs of WT vs. unventilated controls. These changes were blocked or blunted during MV-O(2) of Eexp mice. Scattered lung elastin and emphysematous alveoli observed in WT mice after 36 h of MV-O(2) were attenuated in Eexp mice. Both WT and Eexp mice showed defective VEGF signaling (decreased lung VEGF-R2 protein) and loss of pulmonary microvessels after lengthy MV-O(2), suggesting that elafin's beneficial effects during MV-O(2) derived primarily from preserving matrix elastin and suppressing lung inflammation, thereby enabling alveolar formation during MV-O(2). These results suggest that degradation and remodeling of lung elastin can contribute to defective lung growth in response to MV-O(2) and might be targeted therapeutically to prevent ventilator-induced neonatal lung injury.