Biphasic positive airway pressure (BiLevel) ventilation allows utilization of two alternating positive end-expiratory pressures (PEEP) while permitting unrestricted spontaneous breathing with superimposed synchronized pressure support. We aimed to compare whether BiLevel versus assist-control (A-C) ventilation provides effective gas exchange and reduces severity of early lung injury in preterm lambs. Preterm lambs delivered at 134 d (term = 150 d) were quasirandomized to BiLevel (PEEP low/high 5/20 cm H2O) or A-C5 (PEEP 5 cm H2O) ventilation. Ventilation parameters and arterial blood gases were recorded at regular intervals. Postmortem measurements included pressure-volume relationship, lung inflammatory score, wet/dry body weight ratio, and messenger RNA (mRNA) expression of early markers of lung injury. There were no significant differences between groups in baseline characteristics, oxygenation index (p = 0.49), or partial pressure of carbon dioxide (Paco2) (p = 0.08). BiLevel group lambs showed improved pressure-volume relationship (p = 0.006), lower lung inflammatory score (p = 0.013), and trend toward lower messenger RNA expression of markers of lung injury compared with A-C5 group lambs. In unsedated preterm lambs, BiLevel ventilation provides gas exchange equivalent to A-C ventilation and potentially results in reduced lung injury.