The exact cause of BPD is not known. What is known is that a premature infant’s lungs do not make enough surfactant, resulting in atelectasis. The immature lung is unable to protect itself from the effects of supplemental oxygen. Increased amounts of oxygen cause toxic metabolites to develop, injuring lung tissue. As a response to prolonged oxygen therapy, an inflammatory response is initiated. The damaged lung tissue becomes fibrosed. More oxygen therapy is then needed because of a decreased ventilation capacity, leading to a cycle of further toxicity, injury, inflammation, and fibrosis. Other events that compound the need for oxygen therapy include cardiac defects such as patent ductus arteriosus, infection, pulmonary edema, and pulmonary hypertension. Intubated infants are also at risk of developing structural defects such as a high-arched palate and subglottic narrowing. These defects may result in sleep apnea.

Pulmonary edema may develop in response to left-sided congestive heart failure, salt and water retention related to chronic hypoxia and hypercapnia, or because of increased pulmonary vessel permeability related
to oxygen toxicity. Diuretic therapy used to treat pulmonary edema carries its own risks as infants may develop fluid volume deficit and electrolyte imbalance.

Pulmonary hypertension may develop as a result of hypoxemia, which causes an increase in pulmonary artery pressure. Low serum oxygen levels cause the pulmonary arteries to constrict. Prolonged pulmonary hypertension, in turn, causes the right ventricle to enlarge (cor pulmonale) to have enough force to move blood through the constricted pulmonary arteries. To prevent pulmonary hypertension the Sao₂ should be maintained above 93%.