Children who survive very preterm birth without major disability have a high prevalence of learning difficulty, attention deficit, and minor motor impairment (MMI). To determine whether these difficulties are associated with structural brain abnormalities, we studied 105 preterm children (<32 wk) at 7 y with tests of IQ and MMI (Movement ABC) and detailed magnetic resonance brain scans. Scans were assessed qualitatively for visible cerebral lesions. Volume measurements of the caudate nuclei and hippocampal formations were made. Total brain volume (TBV) was estimated from the head circumference. Qualitative assessment of the scans showed evidence of cerebral lesions in 20 (19%), which were associated with lower IQ and more frequent MMI. IQ correlated with right and left caudate volume (Spearman's rho 0.304 and 0.349; p < 0.01). This association persisted (except for verbal IQ) when caudate volume was expressed as a percentage of estimated TBV to allow for overall brain size. No significant correlations with hippocampal volumes were observed. These differences persisted when only scans from children without visible lesions on scan were considered. MMI was significantly associated only with TBV and was more common in children with evidence of thinning of the posterior corpus callosum, although most children with MMI have a normal corpus callosum. Lower IQs in children who were born preterm are related to poorer development of the caudate relative to the rest of the brain, independent of other lesions. These findings suggest abnormal brain development after perinatal injury or postnatal nutritional deficits is responsible for cognitive deficits in preterm children.