Despite major advances in obstetrics and neonatal intensive care, preterm infants frequently suffer from neurological impairments in later life. Preterm and also full-term neonates are generally susceptible to injury caused by reactive oxygen species due to the immaturity of endogenous radical scavenging systems. It is well known that high oxygen levels experienced during the critical phase of maturation can profoundly influence developmental processes. Supraphysiological oxygen concentrations used for resuscitation or in the care of critically ill infants are known to have deleterious effects on the developing lung and retina, contributing to the pathophysiology of neonatal diseases like bronchopulmonary dysplasia and retinopathy of prematurity. Moreover, experimental work from the last decade suggests that hyperoxia also leads to neuronal and glial cell death, contributing to the injury of white and grey matter observed in preterm infants. During the critical phase of brain maturation, hyperoxia can alter developmental processes, resulting in the disruption of neural plasticity and myelination. However, oxygen therapy can often not be avoided in neonatal intensive care. Therefore, in situations requiring oxygen supplementation, in addition to the development of appropriate monitoring systems, protective and/or regenerative strategies are highly warranted. Here, we summarise the clinical and experimental evidence as well as potential therapeutic strategies, providing an overview of the pathophysiology of oxygen exposure on the developing central nervous system and its impact on neonatal brain injury.