Hypoxia enhances transforming growth factor-β (TGF-β) signaling, inhibiting alveolar development and causing abnormal pulmonary arterial remodeling in the newborn lung. We hypothesized that, during chronic hypoxia, reduced peroxisome proliferator-activated receptor-γ (PPAR-γ) signaling may contribute to, or be caused by, excessive TGF-β signaling. To determine whether PPAR-γ was reduced during hypoxia, C57BL/6 mice were exposed to hypoxia from birth to 2 wk and evaluated for PPAR-γ mRNA and protein. To determine whether rosiglitazone (RGZ, a PPAR-γ agonist) supplementation attenuated the effects of hypoxia, mice were exposed to air or hypoxia from birth to 2 wk in combination with either RGZ or vehicle, and measurements of lung histology, function, parameters related to TGF-β signaling, and collagen content were made. To determine whether excessive TGF-β signaling reduced PPAR-γ, mice were exposed to air or hypoxia from birth to 2 wk in combination with either TGF-β-neutralizing antibody or vehicle, and PPAR-γ signaling was evaluated. We observed that hypoxia reduced PPAR-γ mRNA and protein, in association with impaired alveolarization, increased TGF-β signaling, reduced lung compliance, and increased collagen. RGZ increased PPAR-γ signaling, with improved lung development and compliance in association with reduced collagen and TGF-β signaling. However, no reduction was noted in hypoxia-induced pulmonary vascular remodeling. Inhibition of hypoxia-enhanced TGF-β signaling increased PPAR-γ signaling. These results suggest that hypoxia-induced inhibition of lung development is associated with a mutually antagonistic relationship between reduced PPAR-γ and increased TGF-β signaling. PPAR-γ agonists may be of potential therapeutic significance in attenuating TGF-β signaling and improving alveolar development.