Atlas construction generally includes first an image registration step to normalize all images into a common space and then an atlas building step to fuse the information from all the aligned images. Although numerous atlas construction studies have been performed to improve the accuracy of the image registration step, unweighted or simply weighted average is often used in the atlas building step. In this article, we propose a novel patch-based sparse representation method for atlas construction after all images have been registered into the common space. By taking advantage of local sparse representation, more anatomical details can be recovered in the built atlas. To make the anatomical structures spatially smooth in the atlas, the anatomical feature constraints on group structure of representations and also the overlapping of neighboring patches are imposed to ensure the anatomical consistency between neighboring patches. The proposed method has been applied to 73 neonatal MR images with poor spatial resolution and low tissue contrast, for constructing a neonatal brain atlas with sharp anatomical details. Experimental results demonstrate that the proposed method can significantly enhance the quality of the constructed atlas by discovering more anatomical details especially in the highly convoluted cortical regions. The resulting atlas demonstrates superior performance of our atlas when applied to spatially normalizing three different neonatal datasets, compared with other start-of-the-art neonatal brain atlases. Hum Brain Mapp 35:4663–4677, 2014. © 2014 Wiley Periodicals, Inc.