The highly orchestrated interactions between the epithelium and mesenchyme required for normal lung development can be disrupted by perinatal inflammation in preterm infants, although the mechanisms are incompletely understood. We used transgenic (inhibitory κB kinase β transactivated) mice that conditionally express an activator of the NF-κB pathway in airway epithelium to investigate the impact of epithelial-derived inflammation during lung development. Epithelial NF-κB activation selectively impaired saccular stage lung development, with a phenotype comprising rapidly progressive distal airspace dilation, impaired gas exchange, and perinatal lethality. Epithelial-derived inflammation resulted in disrupted elastic fiber organization and down-regulation of elastin assembly components, including fibulins 4 and 5, lysyl oxidase like–1, and fibrillin-1. Fibulin-5 expression by saccular stage lung fibroblasts was consistently inhibited by treatment with bronchoalveolar lavage fluid from inhibitory κB kinase β transactivated mice, Escherichia coli lipopolysaccharide, or tracheal aspirates from preterm infants exposed to chorioamnionitis. Expression of a dominant NF-κB inhibitor in fibroblasts restored fibulin-5 expression after lipopolysaccharide treatment, whereas reconstitution of fibulin-5 rescued extracellular elastin assembly by saccular stage lung fibroblasts. Elastin organization was disrupted in saccular stage lungs of preterm infants exposed to systemic inflammation. Our study reveals a critical window for elastin assembly during the saccular stage that is disrupted by inflammatory signaling and could be amenable to interventions that restore elastic fiber assembly in the developing lung.