Premature birth can have devastating effects on brain development and long-term functional outcome. Rates of psychiatric illness and learning difficulties are high, and intelligence on average is lower than population means. Brain imaging studies of infants born prematurely have demonstrated reduced volumes of parietal and sensorimotor cortical gray matter regions. Studies of school-aged children have demonstrated reduced volumes of these same regions, as well as in temporal and premotor regions, in both gray and white matter. The degrees of these anatomical abnormalities have been shown to correlate with cognitive outcome and with the degree of fetal immaturity at birth. Functional imaging studies have shown that these anatomical abnormalities are associated with severe disturbances in the organization and use of neural systems subserving language, particularly for school-aged children who have low verbal IQs. Animal models suggest that hypoxia-ischemia may be responsible at least in part for some of the anatomical and functional abnormalities. Increasing evidence suggests that a host of mediators for hypoxic-ischemic insults likely contribute to the disturbances in brain development in preterm infants, including increased apoptosis, free-radical formation, glutamatergic excitotoxicity, and alterations in the expression of a large number of genes that regulate brain maturation, particularly those involved in the development of postsynaptic neurons and the stabilization of synapses. The collaboration of both basic neuroscientists and clinical researchers is needed to understand how normal brain development is derailed by preterm birth and to develop effective prevention and early interventions for these often devastating conditions.