Life‐saving mechanical ventilation can also cause lung injury through the overproduction of reactive oxygen species (ROS), leading to bronchopulmonary dysplasia (BPD)‐like symptoms in preterm infants. It is reported that the autophagic protein microtubule‐associated protein‐1 light chain (LC)‐3B can confer protection against hyperoxia‐induced DNA damage in lung alveolar epithelium. However, its role in the transdifferentiation of type II alveolar epithelial cells (AECIIs) to type I cells (AECIs) is unclear and requires further investigation. In this study, newborn Sprague‐Dawley rats were exposed to 90% oxygen for up to 14 days to mimic BPD in human infants, with neonatal pups exposed to room air (21% oxygen) as controls. Primary rat AECIIs were cultured under hyperoxic conditions for up to 24 hours to further investigate the underlying mechanisms. This study found that hyperoxia promoted a significant and time‐dependent increase of AECII marker surfactant protein (SP)‐C in the lung. The increase of AECI marker T1α was repressed by hyperoxia during lung development. These results indicated an impaired AECII transdifferentiation. Pulmonary ROS concentration and expression of autophagic protein LC‐3B were increased gradually in response to hyperoxia exposure. Furthermore, AECIIs produced more ROS when cultured under hyperoxic conditions in vitro. Both the LC3B expression and the conversion from LC3BI to LC3BII were enhanced in hyperoxic AECs. Interestingly, inhibition of LC3B either by ROS inhibitor N‐acetyl‐l‐cysteine (NAC) or adenovirus‐mediated LC3B shRNA could partly restore AECII transdifferentiation under hyperoxia condition. In summary, the current study reveals a novel role of activated LC3B induced by hyperoxia in AECII transdifferentiation.