Clinical evidence has linked intrauterine compromise such as fetal hypoxemia to poor neurologic outcome in the newborn. In this study we examined the effects of inducing chronic fetal hypoxemia by impairment of placental function on brain development in fetal sheep. Placental insufficiency was induced from 120 to 140 d of gestation (term = 145-148 d) by injection of microspheres into the umbilical circulation in five fetal sheep. Fetal partial pressure of oxygen, PaO2, was reduced from 24.1 +/- 0.5 mm Hg before embolization to 14.8 +/- 0.4 mm Hg after embolization (p < 0.05). In another three fetuses a similar level of hypoxemia (PaO2, 13.8 +/- 0.4 mm Hg) occurred spontaneously. At 140 d of gestation the fetal brains were perfused with fixatives and compared with five control fetuses for the assessment of structural and immunohistochemical alterations. Hypoxemic fetuses demonstrated severe gliosis in the cerebral cortex and reduced myelination of subcortical white matter as visualized by glial fibrillary acidic protein and myelin basic protein staining, respectively (p < 0.05). White matter lesions were observed in two fetuses. The diameter of cerebral capillaries was increased in hypoxemic fetuses (p < 0.05), but there was no change in the number of nitric oxide synthase immunoreactive cells. Growth of neuronal processes was affected in the cerebellum, where there was also a reduction in the number of Purkinje neurons (p < 0.05). These results show that a prolonged period of placental insufficiency, resulting in moderate fetal hypoxemia during the last third of gestation, can affect neurodevelopmental processes that occur late in gestation such as myelination and growth of the cerebellum. This prenatal damage could affect neural connectivity and have functional consequences after birth.