Ventilator-dependent preterm infants are often treated with a prolonged tapering course of dexamethasone to decrease the risk and severity of chronic lung disease. The objective of this study was to assess the effect of this therapy on developmental outcome at 1 year of age. Study participants were 118 very low birth weight infants who, at 15 to 25 days of life, were not weaning from assisted ventilation and were then enrolled in a randomized, placebo-controlled, double-blind trial of a 42-day tapering course of dexamethasone. Infants were examined at 1 year of age, adjusted for prematurity, by a pediatrician and a child psychologist. A physical and neurologic examination was performed, and the Bayley Scales of Infant Development were administered. All examiners were blind to treatment group. Groups were similar in terms of birth weight, gestational age, gender, and race. A higher percentage of dexamethasone recipients had major intracranial abnormalities diagnosed by ultrasonography (21% vs 11%). Group differences were not found for Bayley Mental Development Index (median [range] for dexamethasone-treated group, 94 [50-123]; for placebo group, 90 [28-117]) or Psychomotor Development Index Index (median [range]) for dexamethasone-treated group, 78 (50-109); for placebo-treated group, 81 [28-117]). More dexamethasone-treated infants had cerebral palsy (25% vs 7%) and abnormal neurologic examination findings (45% vs 16%). In stratified analyses, adjusted for major cranial ultrasound abnormalities, these associations persisted (OR values for cerebral palsy, 5.3; 95% CI: 1.3-21.4; OR values for neurologic abnormality 3.6; 95% CI: 1.2-11.0). A 42-day tapering course of dexamethasone was associated with an increased risk of cerebral palsy. Possible explanations include an adverse effect of this therapy on brain development and/or improved survival of infants who either already have neurologic injury or who are at increased risk for such injury.