Infants born with intrauterine growth retardation (IUGR) are at increased risk of adverse pulmonary outcomes at birth, including meconium aspiration and persistent pulmonary hypertension. Preterm infants with IUGR are at especially high risk of developing bronchopulmonary dysplasia (BPD), a disease hallmarked by alveolar hypoplasia. Although vitamin A supplementation has been shown to decrease the incidence of BPD or death in preterm very low birth weight infants, its potential to reduce BPD or death in preterm infants with IUGR remains unknown. We used a well-characterized rat model of caloric restriction to mimic IUGR and determine the impact of IUGR on lung development. We hypothesized that retinoic acid treatment would preserve alveolar formation through increases in key signaling molecules of the retinoic acid signaling pathway. Our results showed that alveolar hypoplasia caused by caloric restriction can be reversed with refeeding, and that retinoic acid prevents the alveolar hypoplasia coincident with the increased expression of elastin and retinoic acid receptor-α and decreased transforming growth factor-β activity in developing rat lungs. These findings suggest that alveolar hypoplasia attributable to caloric restriction is reversible, and raises the possibility that retinoic acid therapy may prove a useful strategy to prevent adverse pulmonary sequelae such as BPD in preterm infants with IUGR.