Nitrogen mustard (NM; mechlorethamine) is a cytotoxic vesicant known to cause acute lung injury which can progress to chronic disease. Due to the complex nature of NM injury, it has been difficult to analyze early responses of resident lung cells that initiate inflammation and disease progression. To investigate this, we developed a model of acute NM toxicity using murine precision cut lung slices (PCLS), which contain all resident lung cell populations. PCLS were exposed to NM (1–100 μM) for 0.5–3 h and analyzed 1 and 3 d later. NM caused a dose-dependent increase in cytotoxicity and a reduction in metabolic activity, as measured by LDH release and WST-1 activity, respectively. Optimal responses were observed with 50 μM NM after 1 h incubation and these conditions were used in further experiments. Analysis of PCLS bioenergetics using an Agilent Seahorse showed that NM impaired both glycolytic activity and mitochondrial respiration. This was associated with injury to the bronchial epithelium and a reduction in methacholine-induced airway contraction. NM was also found to cause DNA damage in bronchial epithelial cells in PCLS, as measured by expression of γ-H2AX, and to induce oxidative stress, which was evident by a reduction in glutathione levels and upregulation of the antioxidant enzyme catalase. Cleaved caspase-3 was also upregulated in airway smooth muscle cells indicating apoptotic cell death. Characterizing early events in NM toxicity is key in identifying therapeutic targets for the development of efficacious countermeasures.