We investigated whether the disparity in neural maturation between breastfed and formula-fed term infants could be corrected by the addition of fish oil, a source of docosahexaenoic acid (DHA, 22:6 omega 3), to infant formula. Healthy, term infants were randomised at birth to receive either a supplemented or placebo formula if their mothers had chosen to bottle feed. Breastfed term infants were enrolled as a reference group. Infant erythrocyte fatty acids and anthropometry were assessed on day 5 and at 6, 16, and 30 weeks of age. Visual evoked potential (VEP) acuity was determined at 16 and 30 weeks. VEP acuities of breastfed and supplemented-formula-fed infants were better than those of placebo-formula-fed infants at both 16 and 30 weeks of age (p < 0.001 and p < 0.01). Erythrocyte DHA in breastfed and supplemented-formula-fed infants was maintained near birth levels throughout the 30-week study period but fell in placebo-formula-fed infants (p < 0.001). Erythrocyte DHA was the only fatty acid that consistently correlated with VEP acuity in all infants at both ages tested. A continuous supply of DHA may be required to achieve optimum VEP acuity since infants breastfed for short periods (< 16 weeks) had slower development of VEP than infants receiving a continuous supply of DHA from either breastmilk or supplemented formula. Erythrocyte arachidonic acid (20:4 omega 6) in supplemented-formula-fed infants was reduced below that of infants fed breastmilk or placebo formula at 16 and 30 weeks (p < 0.001), although no adverse effects were noted, with growth of all infants being similar. DHA seems to be an essential nutrient for the optimum neural maturation of term infants as assessed by VEP acuity. Whether supplementation of formula-fed infants with DHA has long-term benefits remains to be elucidated.