<b><i>Background:</i></b> Despite improvements in perinatal care, bronchopulmonary dysplasia (BPD) in extremely premature infants has not decreased. Postnatal surfactant therapy provides symptomatic relief from respiratory distress syndrome, but does not translate into a reduction in BPD. Therefore, the search for effective interventions to prevent BPD continues. <b><i>Objectives:</i></b> Since PPAR-γ agonists have been demonstrated to promote neonatal lung maturation and injury repair, we hypothesized that a formulation of a PPAR-γ agonist, pioglitazone (PGZ) and a synthetic lung surfactant (a surfactant protein B peptide mimic, B-YL) combined would stimulate lung maturation and block hyperoxia-induced neonatal lung injury more effectively than either modality alone. <b><i>Methods:</i></b> One-day-old Sprague-Dawley rat pups were administered PGZ + B-YL via nebulization every 24 h for up to 72 h. The pups were exposed to either 21 or 95% O₂, and then sacrificed. Their lungs were examined for markers of lung maturation (levels of PPAR-γ, SP-C and choline-phosphate cytidylyltransferase [CCT-α] and [³H]triolein uptake) and injury repair (bronchoalveolar lavage cell count and protein content, and levels of LEF-1, fibronectin, ALK5, and β-catenin) by Western blot analysis. <b><i>Results:</i></b> Markers of alveolar epithelial/mesenchymal maturation (PPAR-γ, SP-C, CCT-α, and triolein uptake) increased significantly in the PGZ + B-YL group, more than with either drug alone. Similarly, markers of hyperoxia-induced lung injury were blocked effectively with PGZ + B-YL treatment. <b><i>Conclusions:</i></b> Nebulized PPAR-γ agonist PGZ with a synthetic lung surfactant accelerates lung maturation and prevents neonatal hyperoxia-induced lung injury more than either modality alone, with the potential to provide more effective prevention of BPD.