Prasiola japonica is an edible alga, and the ethanol extract of P. japonica (Pj-EE) possesses various biological activities. Interestingly, in a recent study, we observed the potent anti-inflammatory activity of the chloroform fraction of Pj-EE (Pj-EE-CF). Thus, to extend the application of Pj-EE-CF, we further studied its effects on lung injury. To establish an experimental model of lung injury, we nasally administered urban particulate matter UPM 1648a (50 mg/kg) to mice. In addition, BEAS-2B cells were treated with 300 μg/mL of UPM 1648a for in vitro analysis. Intranasal administration of UPM 1648a increased lung injury score, macrophage infiltration, and upregulation of the inflammatory enzyme inducible nitric oxide synthase (iNOS) in lung tissues. On the other hand, oral administration of Pj-EE-CF (25, 50, and 100 mg/kg) alleviated these pathological features as assessed by lung wet/dry ratio, lung injury score, bronchoalveolar lavage fluid (BALF) protein amount in the lung tissues up to 70%, 95%, and 99%, respectively. In addition, Pj-EE-CF down-regulated the release of inflammatory cytokines, interleukins (ILs), tumor necrosis factor (TNF)-α, and interferon (IFN)-γ elevated by UPM 1648a in the lung tissues and lung BALF up to 95%. According to Western blot and luciferase assay, Pj-EE-CF (100 mg/kg in vivo or 50 and 100 μg/mL in vitro) significantly reduced the nuclear factor-κB (NF-κB) signal activated by UPM 1648a. Finally, UPM 1648a increased cellular reactive oxygen species (ROS) levels in BEAS-2B cells, while Pj-EE-CF reduced them. These results suggest that Pj-EE-CF alleviates UPM 1648a-induced lung damage via anti-inflammatory and antioxidant activities and by suppressing NF-κB signaling. In conclusion, these observations imply that Pj-EE-CF could be a practical component of food supplements to mitigate air pollution-derived lung damage.