Periventricular leukomalacia (PVL) occurring in premature infants, represents a major precursor for neurological and intellectual impairment, and cerebral palsy in later life. The disorder is characterized by multifocal areas of necrosis found deep in the cortical white matter, which are often symmetrical and occur adjacent to the lateral ventricles. There is no known cure for PVL. Factors predisposing to PVL include birth trauma, asphyxia and respiratory failure, cardiopulmonary defects, premature birth/low birthweight, associated immature cerebrovascular development and lack of appropriate autoregulation of cerebral blood flow in response to hypoxic-ischemic insults. The intrinsic vulnerability of oligodendrocyte precursors is considered as central to the pathogenesis of PVL. These cells are susceptible to a variety of injurious stimuli including free radicals and excitotoxicity induced by hypoxic-ischemic injury (resulting from cerebral hypoperfusion), lack of trophic stimuli, as well as secondary associated events involving microglial and astrocytic activation and the release of pro-inflammatory cytokines TNF-α and IL-6. It is yet unclear whether activated astrocytes and microglia act as principal participants in the development of PVL lesions, or whether they are representatives of an incidental pathological response directed towards repair of tissue injury in PVL. Nevertheless, the accumulated evidence points to a pathological contribution of microglia towards damage. The topography of lesions in PVL most likely reflects a combination of the relatively immature cerebrovasculature together with a failure in perfusion and/or hypoxia during the greatest period of vulnerability occurring around mid-to-late gestation. Mechanisms underlying the pathogenesis of PVL have so far been related to prenatal ischemic injury to the brain initiated within the third trimester, which result in global cognitive and developmental delay and motor disturbances. Over the past few years, several epidemiological and experimental studies have implicated intrauterine infection and chorioamnionitis as causative in the pathogenesis of PVL. In particular, recent investigations have shown that inflammatory responses in the fetus and neonate can contribute towards neonatal brain injury and development-related disabilities including cerebral palsy. This review presents current concepts on the pathogenesis of PVL and emphasizes the increasing evidence for an inflammatory pathogenic component to this disorder, either resulting from hypoxic-ischemic injury or from infection. These findings provide the basis for clinical approaches targeted at protecting the premature brain from inflammatory damage, which may prove beneficial for treating PVL, if identified early in pathogenesis.