Brain injury in premature infants is of enormous public health importance because of the large number of such infants who survive with serious neurodevelopmental disability, including major cognitive deficits and motor disability. This type of brain injury is generally thought to consist primarily of periventricular leukomalacia (PVL), a distinctive form of cerebral white matter injury. Important new work shows that PVL is frequently accompanied by neuronal/axonal disease, affecting the cerebral white matter, thalamus, basal ganglia, cerebral cortex, brain stem, and cerebellum. This constellation of PVL and neuronal/axonal disease is sufficiently distinctive to be termed "encephalopathy of prematurity". The thesis of this Review is that the encephalopathy of prematurity is a complex amalgam of primary destructive disease and secondary maturational and trophic disturbances. This Review integrates the fascinating confluence of new insights into both brain injury and brain development during the human premature period.