A significant proportion of preterm infants develop bronchopulmonary dysplasia (BPD) leading to poor lifelong respiratory health. Limited treatment options exist with continuous positive airway pressure (CPAP) ventilation being one of the few associated with diminished BPD. However, little is known about the effect of the distending pressure of CPAP on the developing lung exposed to hyperoxia. We aimed to identify the functional and structural effects of CPAP in a preterm hyperoxia rabbit model of BPD. Premature rabbit pups were randomized to normoxia, hyperoxia (≥95% O2), or hyperoxia plus 4 h daily CPAP [fraction of inspired oxygen (FiO2) 0.95, 5 cmH2O]. On day 7 postdelivery we performed invasive pressure-volume- and forced oscillation-based pulmonary function tests, before lung harvest for histological evaluation. Alveolar and vascular morphology, airway smooth muscle content, respiratory epithelium height, extracellular matrix components, and inflammatory cytokine expression were quantified. Hyperoxia-reared pups had restrictive lungs: alveolar walls were thickened, with the lung parenchymal tissue, collagen content, and airway smooth muscle content increased. In addition, peripheral pulmonary artery wall thickness was increased. CPAP increased alveolar recruitment and limited the structural effect of hyperoxia on the respiratory epithelium and pulmonary arteries. Additionally, CPAP improved lung function, mitigating hyperoxia-associated changes to respiratory system resistance, tissue damping, and tissue elastance. Hyperoxia disrupted functional and structural lung development. Daily intermittent CPAP limited hyperoxia-associated decreased lung function and attenuated structural changes to pulmonary arteries and respiratory epithelium while having no structural alveolar consequences. The mechanism by which CPAP has these beneficial effects needs further investigation.