Postnatal glucocorticoid treatment of preterm infants was mimicked by treating newborn rats with dexamethasone (0.1–0.01 μg/g, days 1–4). This regimen has been shown to cause delayed alveolarization. Knowing that microvascular maturation (transformation of double- to single-layered capillary networks in alveolar septa) and septal thinning prevent further alveolarization, we measured septal maturation on electron photomicrographs in treated and control animals. In treated rats and before day 10, we observed a premature nonreversing microvascular maturation and a transient septal thinning, which both appeared focally. In vascular casts of both groups, we observed contacts between the two capillary layers of immature alveolar septa, which were predictive for capillary fusions. Studying serial electron microscopic sections of human lungs, we were able to confirm the postulated fusion process for the first time. We conclude that alveolar microvascular maturation indeed occurs by capillary fusion and that the dexamethasone-induced impairment of alveolarization is associated with focal premature capillary fusion. Developmental Dynamics 233:1261–1271, 2005. © 2005 Wiley-Liss, Inc.