The developing brain is susceptible to hypoxic damage because of its high oxygen and energy requirements. Hypoxia-induced inflammatory response has been recognized as one of the main culprits in the development of hypoxic brain injury. In this regard, a hallmark feature is microglial activation which results in overproduction of inflammatory cytokines, free radicals and nitric oxide. Concomitantly, activated microglia exhibit enhanced expression of ion channels such as Kv1.2, Kv1.1 and Nav which further promote the release of inflammatory cytokines, chemokines and reactive oxygen species. Through the above-mentioned inflammatory mediators, activated microglia induce neuronal loss, axonal damage and oligodendroglial death along with myelination disturbances. Our recent studies have extended that tumor necrosis factor-alpha, interleukin-1beta, monocyte chemoattractant protein-1 and macrophage colony stimulating factor produced by activated microglia are linked to the pathogenesis of periventricular white matter damage in the hypoxic brain. It is envisaged that a better understanding of the interactions between microglia and neurons, axons and oligodendrocytes is key to the development of effective preventive and therapeutic strategies for mitigation of hypoxic brain injury.