The hyperoxia-induced pro-inflammatory response and tissue damage constitute pivotal steps leading to bronchopulmonary dysplasia (BPD) in the immature lung. The pro-inflammatory cytokines are considered attractive candidates for a directed intervention but the complex interplay between inflammatory and developmental signaling pathways requires a comprehensive evaluation before introduction into clinical trials as studied here for the death inducing ligand TRAIL. At birth and during prolonged exposure to oxygen and mechanical ventilation, levels of TRAIL were lower in tracheal aspirates of preterm infants <29 weeks of gestation which developed moderate/severe BPD. These findings were reproduced in the newborn mouse model of hyperoxic injury. The loss of TRAIL was associated with increased inflammation, apoptosis induction and more pronounced lung structural simplification after hyperoxia exposure for 7 days while activation of NFκB signaling during exposure to hyperoxia was abrogated. Pretreatment with recombinant TRAIL rescued the developmental distortions in precision cut lung slices of both wildtype and TRAIL−/− mice exposed to hyperoxia. Of importance, TRAIL preserved alveolar type II cells, mesenchymal progenitor cells and vascular endothelial cells. In the situation of TRAIL depletion, our data ascribe oxygen toxicity a more injurious impact on structural lung development. These data are not surprising taking into account the diverse functions of TRAIL and its stimulatory effects on NFκB signaling as central driver of survival and development. TRAIL exerts a protective role in the immature lung as observed for the death inducing ligand TNF-α before.