Hypoxic/ischemic insult, a leading cause of functional brain defects, has been extensively studied in both clinical and experimental animal research, including its etiology, neuropathogenesis, and pharmacological interventions. Transient sublethal hypoxia (TSH) is a common clinical occurrence in the perinatal period. However, its effect on early developing brains remains poorly understood. The present study was designed to investigate the effect of TSH on the dendrite and dendritic spine formation, neuronal and synaptic activity, and cognitive behavior of early postnatal Day 1 rat pups. While TSH showed no obvious effect on gross brain morphology, neuron cell density, or glial activation in the hippocampus, we found transient hypoxia did cause significant changes in neuronal structure and function. In brains exposed to TSH, hippocampal neurons developed shorter and thinner dendrites, with decreased dendritic spine density, and reduced strength in excitatory synaptic transmission. Moreover, TSH‐treated rats showed impaired cognitive performance in spatial learning and memory. Our findings demonstrate that TSH in newborn rats can cause significant impairments in synaptic formation and function, and long‐lasting brain functional deficits. Therefore, this study provides a useful animal model for the study of TSH on early developing brains and to explore potential pharmaceutical interventions for patients subjected to TSH insult.