Physiologic anemia is a common and normal finding in newborn infants. In preterm infants, anemia of prematurity is the result of this normal physiologic process compounded by the morbidity of prematurity. Premature infants reach their nadir hematocrit sooner and at a lower level than term infants do.This article reviews the physiology of stem cell differentiation and the structure and function of the red blood cell, as well as examining red blood cell indices. It also addresses the etiology, symptomatology, diagnostic workup, and treatment/prevention modalities of anemia of prematurity. Treatment for and prevention of anemia of prematurity remain controversial, and specific criteria are lacking.