Oxygen therapy and mechanical ventilation are widely used to treat and manage neonatal emergencies in critically ill newborns. However, they are often associated with adverse effects and result in conditions such as chronic lung disease and bronchopulmonary dysplasia. Hence, aclear understanding of the mechanisms underlying hyperoxia-induced lung damage is crucial in order to mitigate the side effects of oxygen-based therapy. Here, we have established an in vitro model of hyperoxia-induced lung damage in type II alveolar epithelial cells (AECIIs) and delineated the molecular basis of oxygen therapy-induced impaired alveolar development. Thus, AECIIs were exposed to a hyperoxic environment and their cell viability, cell cycle progression, apoptosis, mitochondrial integrity and dynamics, and energy metabolism were assessed. The results showed that hyperoxia has no significant effect as an inhibitor of SMAD3 and ERK1/2 in AECIIs, but leads to significant inhibition of cell viability. Further, hyperoxia was found to promote AECII apoptosis and mitochondrial, whereas chemical inhibition of SMAD3 or ERK1/2 further exacerbated the detrimental effects of hyperoxia in AECIIs. Overall, these findings presented herein demonstrate the critical role of SMAD/ERK signaling in the regulation of AECII behavior in varying oxygen environments. Thus, this study offers novel insights for the prevention of neonatal lung dysfunction in premature infants.