Intrauterine growth restriction (IUGR) increases the risk for bronchopulmonary dysplasia (BPD). Abnormal lung structure has been noted in animal models of IUGR, but whether IUGR adversely impacts fetal pulmonary vascular development and pulmonary artery endothelial cell (PAEC) function is unknown. We hypothesized that IUGR would decrease fetal pulmonary alveolarization, vascular growth, and in vitro PAEC function. Studies were performed in an established model of severe placental insufficiency and IUGR induced by exposing pregnant sheep to elevated temperatures. Alveolarization, quantified by radial alveolar counts, was decreased 20% (P < 0.005) in IUGR fetuses. Pulmonary vessel density was decreased 44% (P < 0.01) in IUGR fetuses. In vitro, insulin increased control PAEC migration, tube formation, and nitric oxide (NO) production. This response was absent in IUGR PAECs. VEGFA stimulated tube formation, and NO production also was absent. In control PAECs, insulin increased cell growth by 68% (P < 0.0001). Cell growth was reduced in IUGR PAECs by 29% at baseline (P < 0.01), and the response to insulin was attenuated (P < 0.005). Despite increased basal and insulin-stimulated Akt phosphorylation in IUGR PAECs, endothelial NO synthase (eNOS) protein expression as well as basal and insulin-stimulated eNOS phosphorylation were decreased in IUGR PAECs. Both VEGFA and VEGFR2 also were decreased in IUGR PAECs. We conclude that fetuses with IUGR are characterized by decreased alveolar and vascular growth and PAEC dysfunction in vitro. This may contribute to the increased risk for adverse respiratory outcomes and BPD in infants with IUGR.