The prevalence of periventricular leukomalacia and its association with clinical neurological signs in school-age preterm children are unknown. We matched 42 eight-year-old children who were born before term with birth weights lower than 1,750 gm (mean, 1,410 gm; gestational age, 31 weeks) with 42 children who were born at term and of normal birth weight, to compare clinical neurological status and magnetic resonance imaging findings. Of the children born prematurely, 9.5% had cerebral palsy and 31% had minor neurological dysfunction whereas 9% of the children born at term had minor neurological dysfunction and none had cerebral palsy. Deviations in tongue movements, heel walking, Fogs test results, and finger opposition, as well as behavioral disturbances, differentiated the preterm from the full-term group. The prevalence of periventricular leukomalacia among all children born prematurely was 32%. It was observed in all children with cerebral palsy, in 25% with minor neurological dysfunction, and in 25% of the clinically healthy preterm children. None of the children born at term had evidence of periventricular leukomalacia. Children with periventricular leukomalacia especially demonstrated poor performance on heel walking and Fogs test. Though commonly found in preterm children, periventricular leukomalacia is not uniformly associated with abnormal neurological findings. A through neurological examination is a better predictor of later developmental problems than is magnetic resonance imaging.