The aim of the study was to investigate the effects of substance P (SP) in hyperoxia‑induced lung injury in newborn rats and to elucidate its protective mechanism of action via the sonic hedgehog (SHH) signaling pathway. Twelve‑hour‑old neonatal Sprague‑Dawley rats were randomly divided into one of four groups: air, hyperoxia, air + SP and hyperoxia + SP. In a separate set of experiments, the neonatal rat pups were exposed to 21 or 95% O2 for 14 days with or without intraperitoneal administration of rat SP. The animals were sacrificed at 3, 7 and 14 days, respectively, of hyperoxia exposure. Lung pathology and grade of lung tissue injury were examined by light microscopy. Oxidative stress was evaluated by malondialdehyde (MDA) and antioxidant activity was measured by superoxide dismutase (SOD) in tissue homogenates. The expression of SHH mRNA and protein were detected by quantitative polymerase chain reaction (qPCR) and western blot analysis, respectively. In the hyperoxia group, marked characteristics of acute lung injury (ALI) were observed. Compared with the simple hyperoxia treatment, the lung damage was significantly ameliorated following the addition of SP. Furthermore, the levels of MDA were decreased and SOD was significantly increased following the addition of SP. SP stimulation may result in activation of the SHH signaling pathway and the expression of SHH markedly increased following treatment with SP. The present study demonstrated that SP protected against the hyperoxia‑induced lung damage by attenuating oxidative stress, elevating the antioxidant activities and upregulating the signaling pathway of SHH.