Alveolarization is the process by which the alveoli, the principal gas exchange units of the lung, are formed. Along with the maturation of the pulmonary vasculature, alveolarization is the objective of late lung development. The terminal airspaces that were formed during early lung development are divided by the process of secondary septation, progressively generating an increasing number of alveoli that are of smaller size, which substantially increases the surface area over which gas exchange can take place. Disturbances to alveolarization occur in bronchopulmonary dysplasia (BPD), which can be complicated by perturbations to the pulmonary vasculature that are associated with the development of pulmonary hypertension. Disturbances to lung development may also occur in persistent pulmonary hypertension of the newborn in term newborn infants, as well as in patients with congenital diaphragmatic hernia. These disturbances can lead to the formation of lungs with fewer and larger alveoli and a dysmorphic pulmonary vasculature. Consequently, affected lungs exhibit a reduced capacity for gas exchange, with important implications for morbidity and mortality in the immediate postnatal period and respiratory health consequences that may persist into adulthood. It is the objective of this Perspectives article to update the reader about recent developments in our understanding of the molecular mechanisms of alveolarization and the pathogenesis of BPD.