In a prospective, blinded study 38 infants of mothers with varying quantities of alcohol ingestion during pregnancy had an EEG at 40 weeks post conceptional age. Bayley Development Tests were administered between 1.5 and 10 months of age. The total power of the EEG during REM sleep was inversely related to subsequent motor development (r = -0.51, F = 13.1, p less than 0.0008) whereas the total power of the EEG during quiet sleep was inversely related to subsequent mental development (r = 0.61, F = 24.4, p less than 0.0001). In alcohol exposed babies EEG abnormalities were present even in the absence of fetal alcohol syndrome (FAS). In 16 older children born to abstainers or alcoholic mothers similar results were obtained. Thus, the power of the EEG during REM and quiet sleep at birth appears to be a sensitive index of alcohol effects on the fetal brain and may be used to predict future motor and mental development.