Lung diseases, such as bronchopulmonary dysplasia (BPD), wheezing, and asthma, remain significant causes of morbidity and mortality in the pediatric population, particularly in the setting of premature birth. Pulmonary outcomes in these infants are highly influenced by perinatal exposures including prenatal inflammation, postnatal intensive care unit interventions, and environmental agents. Here, there is strong evidence that perinatal supplemental oxygen administration has significant effects on pulmonary development and health. This is of particular importance in the preterm lung, where premature exposure to room air represents a hyperoxic insult that may cause harm to a lung primed to develop in a hypoxic environment. Preterm infants are also subject to increased episodes of hypoxia, which may also result in pulmonary damage and disease. Here, we summarize current understanding of the effects of oxygen on the developing lung and how low vs. high oxygen may predispose to pulmonary disease that may extend even into adulthood. Better understanding of the underlying mechanisms will help lead to improved care and outcomes in this vulnerable population.