Background: Inflammatory injury, particularly the production of active interleukin (IL)-1β plays a major role in the pathogenesis of bronchopulmonary dysplasia (BPD) in preterm infants. The release of active IL-1β is controlled by posttranscriptional modifications of its proform (pro-IL-1β) through the inflammasome. Rac1 is a member of the Rho family of GTPases that regulate the inflammatory process. Objective: This study tested the hypothesis that Rac1 signaling increases inflammasome activation that results in damaging inflammation, and that the inhibition of Rac1 signaling prevents lung injury, by inhibiting inflammasome activation in a newborn rat model of BPD induced by hyperoxia. Methods: Newborn rat pups were exposed to room air or hyperoxia (85% O2) and received daily intraperitoneal injections of placebo (normal saline) or NSC23766, a specific Rac1 inhibitor, for 10 days. The effects on lung inflammation, alveolarization, vascular development, vascular remodeling, right ventricular systolic pressure, and right ventricular hypertrophy (RVH) were then assessed. Results: Hyperoxia exposure upregulated Rac1 and increased the production of active IL-1β, which was accompanied by increasing expression of the inflammasome. In addition, hyperoxia induced the pathological hallmarks of BPD. However, treatment with NSC23766 significantly decreased inflammasome activation and macrophage infiltration, improved alveolar and vascular development, and reduced pulmonary vascular remodeling and RVH. Conclusion: These results indicate that Rac1 signaling regulates the expression of the inflammasome and plays a pivotal role in the pathogenesis of hyperoxia-induced neonatal lung injury. Therefore, targeting Rac1 signaling may provide a novel strategy to prevent and treat BPD in preterm infants.