Xenon (Xe) is an inert, colorless and odorless heavy gas and has many biological functions. However, little is known about whether and how Xe can modulate hypoxic-ischemic brain damage (HIBD) in neonatal rats. This study employed a neonatal rat model to explore the potential effect of Xe on neuron autophagy and the severity of HIBD. Neonatal Sprague–Dawley rats were subjected to HIBD, randomized and treated with Xe or mild hypothermia (at 32 °C) for 3 h. The degrees of HIBD, neuron autophagy and the neuronal functions in some neonates from each group were tested by histopathology, immunochemistry, transmission electron microscopy, western blot, open-field and Trapeze tests at 3 and 28 days post-induction of HIBD, respectively. Compared with the Sham group, hypoxic-ischemia caused larger volumes of cerebral infarction and severe brain damage, and increased autophagosome formation and Beclin-1 and microtubule-associated protein 1A/1B-light chain 3 class II (LC3-II) expression in the brain of rats, accompanied by the defect in neuronal functions. In contrast, treatment with Xe and/or hypothermia significantly reduced infarct volumes and ameliorated neurological defects in the HIBD rats, particularly for the combination of Xe and hypothermia. Xe significantly mitigated the relative levels of Beclin-1 and LC3-II expression and autophagosome formation induced by HIBD in rats. Xe acted as a neuroprotective factor against HIBD, possibly by inhibiting the hypoxia-induced neuron autophagy in rats.