Perinatal inflammatory stress is associated with early life morbidity and lifelong consequences for pulmonary health. Chorioamnionitis, an inflammatory condition affecting the placenta and fluid surrounding the developing fetus, affects 25 to 40% of preterm births. Severe chorioamnionitis with preterm birth is associated with significantly increased risk of pulmonary disease and secondary infections in childhood, suggesting that fetal inflammation may markedly alter the development of the lung. Here, we used intra-amniotic lipopolysaccharide (LPS) challenge to induce experimental chorioamnionitis in a prenatal rhesus macaque (Macaca mulatta) model that mirrors structural and temporal aspects of human lung development. Inflammatory injury directly disrupted the developing gas exchange surface of the primate lung, with extensive damage to alveolar structure, particularly the close association and coordinated differentiation of alveolar type 1 pneumocytes and specialized alveolar capillary endothelium. Single-cell RNA sequencing analysis defined a multicellular alveolar signaling niche driving alveologenesis that was extensively disrupted by perinatal inflammation, leading to a loss of gas exchange surface and alveolar simplification, with notable resemblance to chronic lung disease in newborns. Blockade of the inflammatory cytokines interleukin-1β and tumor necrosis factor-α ameliorated LPS-induced inflammatory lung injury by blunting stromal responses to inflammation and modulating innate immune activation in myeloid cells, restoring structural integrity and key signaling networks in the developing alveolus. These data provide new insight into the pathophysiology of developmental lung injury and suggest that modulating inflammation is a promising therapeutic approach to prevent fetal consequences of chorioamnionitis.