Key points Erythropoietin (EPO) has been suggested as a potential treatment for bronchopulmonary dysplasia (BPD) in preterm infants. Ventilation‐induced lung injury (VILI) is a major cause of BPD in preterm neonates. We investigated whether early high‐dose EPO (i.v. 5000 IU kg−1) administration can reduce lung inflammation and injury resultant from VILI in ventilated preterm lambs. Early high‐dose EPO administration increased mRNA expression of early markers of lung inflammation and injury and systemic injury controls. Early high‐dose EPO worsened histological assessment of inflammation, airway wall thickness, haemorrhage and total injury compared to controls. Early high‐dose EPO may increase the incidence and severity of respiratory disease in ventilated, preterm neonates. Abstract Ventilation‐induced lung injury (VILI) of preterm neonates probably contributes to the pathogenesis of bronchopulmonary dysplasia (BPD). Erythropoietin (EPO) has been suggested as a therapy for BPD. The aim of this study was to determine whether prophylactic administration of EPO reduces VILI in preterm newborn lambs. Lambs at 126 days of gestation (term is 147 days) were delivered and ventilated with a high tidal volume strategy for 15 min to cause lung injury, then received gentle ventilation until 2 h of age. Lambs were randomized to receive intravenous EPO (5000 IU kg−1: Vent+EPO; n = 6) or phosphate‐buffered saline (Vent; n = 7) soon after birth: unventilated controls (UVC; n = 8) did not receive ventilation or any treatment. Physiological parameters were recorded throughout the experimental procedure. Samples of lung were collected for histological and molecular assessment of inflammation and injury. Samples of liver were collected to assess the systemic acute phase response. Vent+EPO lambs received higher F IO 2, P aO 2 and oxygenation during the first 10 min than Vent lambs. There were no differences in physiological indices beyond this time. Total lung injury score, airway wall thickness, inflammation and haemorrhage were higher in Vent+EPO lambs than in Vent lambs. Lung inflammation and early markers of lung and systemic injury were elevated in ventilated lambs relative to unventilated lambs; EPO administration further increased lung inflammation and markers of lung and systemic injury. Prophylactic EPO exacerbates VILI, which may increase the incidence and severity of long‐term respiratory disease. More studies are required before EPO can be used for lung protection in preterm infants.