Speech scientists have long proposed that formant exaggeration in infant-directed speech plays an important role in language acquisition. This event-related potential (ERP) study investigated neural coding of formant-exaggerated speech in 6–12-month-old infants. Two synthetic /i/ vowels were presented in alternating blocks to test the effects of formant exaggeration. ERP waveform analysis showed significantly enhanced N250 for formant exaggeration, which was more prominent in the right hemisphere than the left. Time-frequency analysis indicated increased neural synchronization for processing formant-exaggerated speech in the delta band at frontal-central-parietal electrode sites as well as in the theta band at frontal-central sites. Minimum norm estimates further revealed a bilateral temporal-parietal-frontal neural network in the infant brain sensitive to formant exaggeration. Collectively, these results provide the first evidence that formant expansion in infant-directed speech enhances neural activities for phonetic encoding and language learning.