Chorioamnionitis, mechanical ventilation, oxygen therapy, and postnatal infection promote inflammation in the newborn lung. The long-term consequences of pulmonary inflammation during infancy have not been well characterized. The aim of this study was to examine the impact of inflammation during the late saccular to alveolar stages of lung development on lung structure and function in adulthood. To induce IL-1β expression in the pulmonary epithelium of mice with a tetracycline-inducible human IL-1β transgene, doxycycline was administered via intraperitoneal injections to bitransgenic pups and their littermate controls on postnatal days (PN) 0, 0.5, and 1. Lung structure, inflammation, and airway reactivity were studied in adulthood. IL-1β production in early life resulted in increased numbers of macrophages and neutrophils on PN21, but inflammation subsided by PN42. Permanent changes in alveolar structure, i.e., larger alveoli and thicker alveolar walls, were present from PN21 to PN84. Lack of alveolar septation thus persisted after IL-1β production and inflammation had ceased. Early IL-1β production caused goblet cell hyperplasia, enhanced calcium-activated chloride channel 3 (CLCA3) protein expression, and increased airway reactivity in response to methacholine on PN42. Lymphoid follicles were present adjacent to small airways in the lungs of adult bitransgenic mice, and levels of the B cell chemoattractant CXC-motif ligand (CXCL) 13 were elevated in the lungs of bitransgenic mice compared with controls. In conclusion, IL-1β-induced pulmonary inflammation in early life causes a chronic lung disease in adulthood.