Our previous study showed that lipopolysaccharide (LPS)-induced brain injury in the neonatal rat is associated with nitrosative and oxidative stress. The present study was conducted to examine whether melatonin, an endogenous molecule with antioxidant properties, reduces systemic LPS-induced nitrosative and oxidative damage in the neonatal rat brain. Intraperitoneal (i.p.) injection of LPS (2 mg/kg) was administered to Sprague–Dawley rat pups on postnatal day 5 (P5), and i.p. administration of melatonin (20 mg/kg) or vehicle was performed 5 minutes after LPS injection. Sensorimotor behavioral tests were performed 24 h after LPS exposure, and brain injury was examined after these tests. The results show that systemic LPS exposure resulted in impaired sensorimotor behavioral performance, and acute brain injury, as indicated by the loss of oligodendrocyte immunoreactivity and a decrease in mitochondrial activity in the neonatal rat brain. Melatonin treatment significantly reduced LPS-induced neurobehavioral disturbances and brain damage in neonatal rats. The neuroprotective effect of melatonin was associated with attenuation of LPS-induced nitrosative and oxidative stress, as indicated by the decreased nitrotyrosine- and 4-hydroxynonenal-positive staining in the brain following melatonin and LPS exposure in neonatal rats. Further, melatonin significantly attenuated LPS-induced increases in the number of activated microglia in the neonatal rat brain. The protection provided by melatonin was also associated with a reduced number of inducible nitric oxide synthase (iNOS)+ cells, which were double-labeled with ED1 (microglia). Our results show that melatonin prevents the brain injury and neurobehavioral disturbances induced by systemic LPS exposure in neonatal rats, and its neuroprotective effects are associated with its impact on nitrosative and oxidative stress.