Connective tissue growth factor (CTGF) is a member of an emerging family of immediate-early gene products that coordinates complex biological processes during development, differentiation and tissue repair. Over-expression of CTGF is associated with mechanical ventilation with high tidal volume and oxygen exposure in newborn lungs. However, the role of CTGF in postnatal lung development and remodeling is not well understood. In the present study, a double transgenic mouse model was generated with doxycycline-inducible over-expression of CTGF in respiratory epithelial cells. Over-expression of CTGF from postnatal day 1 to 14 resulted in thicker alveolar septa and decreased secondary septal formation. This is correlated with increased myofibroblast differentiation and disorganized elastic fiber deposition in alveolar septa. Over-expression of CTGF also decreased alveolar capillary network formation. There were increased alpha-smooth muscle actin expression and collagen deposition, and dramatic thickening in the peribronchial/peribronchiolar and perivascular regions in the double transgenic lungs. Furthermore, over-expression of CTGF increased integrin-linked kinase (ILK) expression, activated its downstream signaling target Akt as well as increased mRNA expression of fibronectin. These data demonstrate that over-expression of CTGF disrupts alveologenesis and capillary formation, and induces fibrosis during the critical period of alveolar developmental. These histological changes are similar to those observed in lungs of infants with bronchopulmonary dysplasia (BPD).