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The lateral habenula is a nucleus in the dorsal thalamus that innervates midbrain dopaminergic and serotonergic nuclei via projections through its major efferent pathway, the fasciculus retroflexus (FR). It was previously demonstrated that cocaine administered continuously to adult rats over several days produces neurodegeneration in the lateral habenula and FR. Because exposure to cocaine during pregnancy reportedly can cause neurobehavioral deficits, we examined whether rat fetuses exposed to continuous cocaine during the last week of gestation would similarly demonstrate selective neurodegeneration in the lateral habenula. On day 17 of gestation, dams were implanted with two silicone pellets, each containing either vehicle or one of 2 doses of cocaine (80 mg or 55 mg per pellet). Degenerating neurons containing silver deposits were counted in lateral habenula and in the striatum. Cocaine-exposed pups had significantly more silver-stained cells in the lateral habenula than vehicle-treated pups, but similar numbers of silver-stained cells were present in the striatum of all three groups. When similarly treated vehicle- and cocaine-exposed animals were tested behaviorally at 60 days of age, they did not differ on measures of open field activity, open arm avoidance on the elevated plus-maze or conditioned place preference for cocaine, although a linear trend analysis indicated some hyperactivity of the cocaine-pretreated pups during the place preference test. These results indicate that continuous cocaine exposure has selective neurotoxic effects on the habenula of the developing fetus similar to cocaine's effects in the adult.