Mitochondrial dysfunction at birth predicts bronchopulmonary dysplasia (BPD) in extremely low–birth weight (ELBW) infants. Recently, nebulized thyroid hormone (TH), given as triiodothyronine (T3), was noted to decrease pulmonary fibrosis in adult animals through improved mitochondrial function. In this study, we tested the hypothesis that TH may have similar effects on hyperoxia-induced neonatal lung injury and mitochondrial dysfunction by testing whether i.n. T3 decreases neonatal hyperoxic lung injury in newborn mice; whether T3 improves mitochondrial function in lung homogenates, neonatal murine lung fibroblasts (NMLFs), and umbilical cord–derived mesenchymal stem cells (UC-MSCs) obtained from ELBW infants; and whether neonatal hypothyroxinemia is associated with BPD in ELBW infants. We found that inhaled T3 (given i.n.) attenuated hyperoxia-induced lung injury and mitochondrial dysfunction in newborn mice. T3 also reduced bioenergetic deficits in UC-MSCs obtained from both infants with no or mild BPD and those with moderate to severe BPD. T3 also increased the content of peroxisome proliferator–activated receptor γ coactivator 1α in lung homogenates of mice exposed to hyperoxia as well as mitochondrial potential in both NMLFs and UC-MSCs. ELBW infants who died or developed moderate to severe BPD had lower total T4 (TT4) compared with survivors with no or mild BPD. In conclusion, TH signaling and function may play a critical role in neonatal lung injury, and inhaled T3 supplementation may be useful as a therapeutic strategy for BPD.