Prenatal cocaine exposure (PCE) is associated with attention/arousal dysregulation and possible inefficiencies in some cognitive functions. However, the neurobiological bases of these teratogenic effects have not been well characterized. Because activities in the default mode network (DMN) reflect intrinsic brain functions that are closely associated with arousal regulation and cognition, alterations in the DMN could underlie cognitive effects related to PCE. With resting-state and task activation functional magnetic resonance imaging (fMRI), this study investigated the possible PCE related changes in functional brain connectivity and brain activation in the DMN. In the resting state, the PCE group was found to have stronger functional connectivity in the DMN, as compared to the nonexposed controls. During a working memory task with emotional distracters, the PCE group exhibited less deactivation in the DMN and their fMRI signal was more increased by emotional arousal. These data revealed additional neural effects related to PCE, and consistent with previous findings, indicate that PCE may affect behavior and functioning by increasing baseline arousal and altering the excitatory/inhibitory balancing mechanisms involved in cognitive resource allocation. Hum Brain Mapp, 2011. © 2010 Wiley-Liss, Inc.