Gestational exposure to licit drugs of abuse such as alcohol and cigarettes, and illicit drugs of abuse such as marijuana, cocaine, and opiates is the single largest, preventable cause of in utero developmental compromise of infants in the United States today. Clinical and preclinical data suggest that cocaine may act as a behavioral teratogen, a drug capable of altering fetal brain development and subsequent function. Although many children exposed to cocaine in utero have normal development, some subset of infants, especially those who have sustained more significant prenatal exposures, are at risk for developmental compromise. There does not appear to be one outcome, but a spectrum of outcomes, which may relate to individual genetic differences in mothers and infants, to the specifics of the pregnant woman's cocaine habit, as well as to the richness of the postnatal environment. Alterations of arousal and habituation are evident in some cocaine-exposed neonates, especially following greater in utero exposures. Subtle but profoundly important behavioral deficits may persist, as recent data suggests that some cocaine-exposed children may have particular difficulty modulating attention, impulsivity, and responsivity, which are critically challenged in classroom settings. The goals of this article are to present concepts required to better understand cocaine-induced alterations in neuro-development, to outline mechanisms that may underlie such changes, and to discuss the potential clinical consequences of such alterations.