During early post-natal life, neonates must adjust to the transition from the sheltered intra-uterine environment to the microbe-laden external world, wherein they encounter a constellation of antigens and the colonization by the microbiome. At this vulnerable stage, neonatal immune responses are considered immature and present significant differences to those of adults. Pertinent to innate immunity, functional and quantitative deficiencies in antigen-presenting cells and phagocytes are often documented. Exposure to environmental antigens and microbial colonization is associated with epigenetic immune cell reprogramming and activation of effector and regulatory mechanisms that ensure age-depended immune system maturation and prevention of tissue damage. Moreover, neonatal innate immune memory has emerged as a critical mechanism providing protection against infectious agents. Still, in neonates, inexperience to antigenic exposure, along with enhancement of tissue-protective immunosuppressive mechanisms are often associated with severe immunopathological conditions, including sepsis and neurodevelopmental disorders. Despite significant advances in the field, adequate vaccination in newborns is still in its infancy due to elemental restrictions associated also with defective immune responses. In this review, we provide an overview of neonatal innate immune cells, highlighting phenotypic and functional disparities with their adult counterparts. We also discuss the effects of epigenetic modifications and microbial colonization on the regulation of neonatal immunity. A recent update on mechanisms underlying dysregulated neonatal innate immunity and linked infectious and neurodevelopmental diseases is provided. Understanding of the mechanisms that augment innate immune responsiveness in neonates may facilitate the development of improved vaccination protocols that can protect against pathogens and organ damage.