Studies of both preclinical and human models of prenatal cocaine exposure suggest that one mechanism for the impact of cocaine on developing neural systems may be through functional alterations in monoaminergically regulated arousal systems. Conceptually, arousal regulation refers to a set of multimodal central nervous system mechanisms underlying cortical activation in response to internal and/or external stimulation. The emerging capacity for moment-to-moment regulation of states of arousal influences attentional states (e.g., posterior cortex) and executive functions (prefontal cortex) and thus information processing and learning as well as socialization. Furthermore, as a gating mechanism for response to novel and/or stressful conditions, arousal regulation is also a central construct for understanding stress reactivity and response to acute chronic trauma. In this paper, we review the findings of prenatal cocaine exposure in both preclinical and human studies with a particular focus on studies of neurobehavioral, neurocognitive functioning. A theoretical model of interactive arousal systems is presented as one possibility for integrating the profile of apparent cocaine-related neurobehavioral impairments in infants and young children prenatally exposed to cocaine.