Clinical observation indicates that exercise capacity, an important determinant of survival in patients with congenital heart disease (CHD), is most decreased in children with reduced pulmonary blood flow (RPF). However, the underlying mechanism remains unclear. Here, we obtained human RPF lung samples from children with tetralogy of Fallot as well as piglet and rat RPF lung samples from animals with pulmonary artery banding surgery. We observed impaired alveolarization and vascularization, the main characteristics of pulmonary dysplasia, in the lungs of RPF infants, piglets, and rats. RPF caused smaller lungs, cyanosis, and body weight loss in neonatal rats and reduced the number of alveolar type 2 cells. RNA-sequencing demonstrated that RPF induced the downregulation of metabolism and migration, a key biological process of late alveolar development, and the upregulation of immune response, which was confirmed by flow cytometry and cytokine detection. In addition, the immunosuppressant cyclosporine A rescued pulmonary dysplasia and increased the expression of the Wnt signaling pathway, which is the driver of postnatal lung development. We concluded that RPF results in pulmonary dysplasia, which may account for the reduced exercise capacity of CHD patients with RPF. The underlying mechanism is associated with immune response activation, and immunosuppressants have a therapeutic effect in CHD-associated pulmonary dysplasia.