Rationale Chorioamnionitis and antenatal corticosteroids mature the fetal lung functionally but disrupt late gestation lung development. Because Sonic Hedgehog (Shh) signaling is a major pathway directing lung development, we hypothesized that chorioamnionitis and antenatal corticosteroids modulated Shh signaling resulting in an altered fetal lung structure. Methods Time-mated ewes with singleton ovine fetuses received an intra-amniotic injection of lipopolysaccharide (LPS) and/or maternal intra-muscular betamethasone 7 and/or 14 days before delivery at 120 days gestational age (GA) (term=150 days GA). Results Intra-amniotic LPS exposure decreased Shh mRNA levels and Gli1 protein expression which was counteracted by both betamethasone pre- or post-treatment. mRNA and protein levels of fibroblast growth factor 10 and bone morphogenetic protein 4, which are important mediators of lung development, increased 2-fold and 3.5-fold respectively, 14 days after LPS exposure. Both 7 day and 14 day exposure to LPS changed the mRNA levels of elastin gene ELN and collagen type I genes Col1A1 and Col1A2 which resulted in fewer elastin foci and increased collagen type I deposition in the alveolar septa. Corticosteroid post-treatment prevented the decrease in ELN mRNA and increased elastin foci and decreased collagen type I deposition in the fetal lung. Conclusion Fetal lung exposure to LPS was accompanied by changes in key modulators of lung development resulting in abnormal lung structure. Betamethasone treatment partially prevented the changes in developmental processes and lung structure. This study provides new insights into clinically relevant prenatal exposures and fetal lung development.