Diffuse white matter injury (DWMI) caused by hypoxia is associated with permanent neurodevelopmental disabilities in preterm infants. The cellular and molecular mechanisms producing DWMI are poorly defined. Using a mouse model of neonatal hypoxia, we demonstrate a biphasic effect on oligodendrocyte development, resulting in hypomyelination. Oligodendrocyte death and oligodendrocyte progenitor cell (OPC) proliferation during the week after hypoxia were followed by delayed oligodendrocyte differentiation and abnormal myelination, as demonstrated by electron microscopy. Cdk2 activation was essential for the regenerative OPC response after hypoxia and was accompanied by reduced FoxO1-dependent p27(Kip1) expression. p27(Kip1) was also reduced in OPCs in human infant white matter lesions after hypoxia. The negative effects of hypoxia on oligodendrogenesis and myelination were more pronounced in p27(Kip1)-null mice; conversely, overexpression of FoxO1 or p27(Kip1) in OPCs after hypoxia promoted oligodendrogenesis. Our studies demonstrate for the first time that neonatal hypoxia affects the Foxo1/p27(Kip1) pathway during white matter development. We also show that molecular manipulation of this pathway enhances oligodendrocyte regeneration during a critical developmental time window after DWMI. Thus, FoxO1 and p27(Kip1) may serve as promising target molecules for promoting timely oligodendrogenesis in neonatal DWMI.