Rationale: Bronchopulmonary dysplasia (BPD) is a chronic lung disease that adversely affects long-term pulmonary function as well as neurodevelopmental outcomes of preterm infants. Elastolytic proteases have been implicated in the pathogenesis of BPD. Cathepsin S is a cysteine protease with potent elastolytic activity. Increased levels and activity of cathepsin S have been detected in a baboon model of BPD. Objective: To investigate whether deficiency of cathepsin S alters the course of hyperoxiainduced neonatal lung injury in mice. Methods: Newborn wild-type and cathepsin S-deficient mice were exposed to 80% oxygen for 14 days. Histologic and morphometric analysis were performed and bronchoalveolar lavage protein and cells were analyzed. Lung elastin was assessed by real-time PCR, in situ hybridization, desmosine analysis, and Hart's stain. Distribution of myofibroblasts was analyzed by immunofluorescence. Hydroxyproline content of lung tissues was measured. Measurements and Main Results: Hyperoxia-exposed cathepsin S-deficient mice were protected from growth restriction and had improved alveolarization, decreased septal wall thickness, lower number of macrophages and lower protein concentration in bronchoalveolar lavage fluid. Alpha smooth muscle actin-expressing myofibroblasts accounted for at least some of the increased interstitial cellularity in hyperoxia-exposed mouse lungs and were significantly less in cathepsin-S deficient lungs. Lung hydroxyproline content was increased in hyperoxia-exposed wild-type, but not in cathepsin S-deficient lungs. Desmosine content was significantly reduced in both genotypes with hyperoxia. Conclusions: Cathepsin S deficiency improves alveolarization, and attenuates macrophage influx and fibroproliferative changes in hyperoxia-induced neonatal mouse lung injury.