Bronchopulmonary dysplasia (BPD) is the most common and serious chronic lung disease of preterm infants. The development of pulmonary hypertension (PH) significantly increases the mortality and morbidity of this disease. β-Catenin signaling plays an important role in tissue development and remodeling. Aberrant β-catenin signaling is associated with clinical and experiment models of BPD. To test the hypothesis that inhibition of β-catenin signaling is beneficial in promoting alveolar and vascular development and preventing PH in experimental BPD, we examined the effects of ICG001, a newly developed pharmacological inhibitor of β-catenin, in preventing hyperoxia-induced BPD in neonatal rats. Newborn rat pups were randomized at postnatal day (P)2 to room air (RA) + DMSO (placebo), RA + ICG001, 90% Fi_O2 (O₂) + DMSO, or O₂ + ICG001. ICG001 (10 mg/kg) or DMSO was given by daily intraperitoneal injection for 14 days during continuous exposure to RA or hyperoxia. Primary human pulmonary arterial smooth muscle cells (PASMCs) were cultured in RA or hyperoxia (95% O₂) in the presence of DMSO or ICG001 for 24 to 72 hours. Treatment with ICG001 significantly increased alveolarization and reduced pulmonary vascular remodeling and PH during hyperoxia. Furthermore, administering ICG001 decreased PASMC proliferation and expression of extracellular matrix remodeling molecules in vitro under hyperoxia. Finally, these structural, cellular, and molecular effects of ICG001 were associated with down-regulation of multiple β-catenin target genes. These data indicate that β-catenin signaling mediates hyperoxia-induced alveolar impairment and PH in neonatal animals. Targeting β-catenin may provide a novel strategy to alleviate BPD in preterm infants.