Hyperoxia exposure is a significant risk factor for the impaired alveolarization characteristic of bronchopulmonary dysplasia. Type II alveolar epithelial cells (AECIIs) may serve as “alveolar stem cells” to transdifferentiate into type I alveolar epithelial cells (AECIs). Here, we show that hyperoxia is capable of inducing transdifferentiation of AECIIs in premature rats in vitro. Hyperoxia-induced transdifferentiation was characterized by typical morphological changes, inhibition of cellular proliferation, decline in expression rate of Ki67, accumulation of cells in the G1 phase of the cell cycle, increased expression of AECI-specific protein aquaporin 5, and decreased expression of AECII-associated protein surfactant protein C. These results suggest that hyperoxia may induce transdifferentiation of AECIIs into AECIs and the transdifferentiation may be responsible for repairing early lung injury.