ABSTRACT: Background: Neonatal sepsis-associated acute lung injury (ALI) is a therapeutic challenge. This study evaluated the efficacy of CQMUH-011, a novel small-molecule compound, against lipopolysaccharide (LPS)-induced ALI in neonatal rabbits. Methods: Neonatal rabbits at postnatal age 5-7 days were intraperitoneally injected with LPS (50 mg/kg) to induce ALI, and subsequently treated with CQMUH-011 at 675 μg/kg at 0.5 hour. Outcomes within 10-hour of observation were assessed through survival analysis, neurobehavioral assessment, blood gas, histopathological scoring, alveolar phospholipid quantification in bronchoalveolar lavage fluid, RT-PCR for inflammatory mediators and surfactant proteins, and gene expression profiles through transcriptomic analysis. Results: LPS administration induced severe ALI characterized by metabolic acidosis, hypoxemia, lung inflammatory injury, neuromotor dysfunction, and mortality. CQMUH-011 improved neurological deficits, restored blood gas balance, enriched phospholipid pool, reduced lung injury scores, diminished leukocyte infiltration and improved alveolar expansion. RT-PCR results showed significantly mitigated mRNA expressions of proinflammatory cytokines and enhanced surfactant proteins and phospholipid synthesis-associated enzymes. Transcriptomic analysis revealed the dual mechanism of CQMUH-011 by downregulating multiple inflammatory pathways, including cytokine-cytokine receptor interaction, T-helper 17 cell differentiation, interleukin-17 and nuclear transcription factor-kappa B, tumor necrosis factor-α, concurrent with activation of phosphatidylinositol 3-kinase/protein kinase B-dependent cytoprotection, cytoskeletal remodeling, and intercellular junction reinforcement. Conclusions: CQMUH-011 exerts potent anti-inflammatory and lung-protective effects in neonatal ALI by modulating critical inflammatory and repair pathways, making it a promising therapeutic candidate for sepsis-associated ALI.