Neonatal stroke is a condition that leads to disability in later life, and as yet there is no effective treatment. Recently, erythropoietin (EPO) has been shown to be cytoprotective following brain injury and may promote neurogenesis. However, the effect of EPO on functional outcome and on morphologic changes in neonatal subventricular zone (SVZ) following experimental neonatal stroke has not been described. We used a transient focal model of neonatal stroke in P10 rat. Injury was documented by diffusion weighted MRI during occlusion. Immediately upon reperfusion, either EPO (5U/gm) or vehicle was administered intraperitoneally and animals were allowed to grow for 2 wk. Sensorimotor function was assessed using the cylinder rearing test and then brains were processed for volumetric analysis of the SVZ. Stroke induced SVZ expansion proportional to hemispheric volume loss. EPO treatment markedly preserved hemispheric volume and decreased the expansion of SVZ unilaterally. Furthermore, EPO treatment significantly improved the asymmetry of forelimb use following neonatal stroke. This functional improvement directly correlated with the amount of preserved hemispheric volume. These results suggest EPO may be a candidate in the treatment of neonatal stroke.