Recent clinical studies have suggested that treatment with atypical antipsychotic drugs, such as olanzapine, may slow progressive changes in brain structure in patients with schizophrenia. To investigate the possible neural basis of this effect, we sought to determine whether treatment with olanzapine would inhibit the loss of hippocampal neurons associated with the administration of the excitotoxin, kainic acid, in neonatal rats. At post-natal day 7 (P7), rats were exposed to kainic acid via intracerebroventricular administration. Neuronal loss within the CA2 and CA3 subfields of the hippocampus and neurogenesis within the dentate gyrus of the hippocampus were then assessed at P14 by Fluoro-Jade B and BrdU labeling, respectively. Daily doses of olanzapine (2, 6, or 12 mg/day), haloperidol (1.2 mg/kg), melatonin (10 mg/kg), or saline were administered between P7 and P14. Melatonin is an anti-oxidant drug and was included in this study as a positive control, since it has been observed to have neuroprotective effects in a variety of animal models. The highest dose of olanzapine and melatonin, but not haloperidol, ameliorated the hippocampal neuronal loss triggered by kainic acid administration. However, drug administration did not have a significant effect on the rate of neurogenesis. These results suggest that olanzapine has neuroprotective effects in a rat model of neurodevelopmental insult, and may be relevant to the observed effects of atypical antipsychotic drugs on brain structure in patients with schizophrenia.