Previous studies of children with in-utero drug exposure (IUDE) raise concerns that decreased head circumference (HC) at birth increases the child's risk for later compromised cognitive functioning. The purpose of this study was to determine if HC at birth and HC growth change are associated with cognitive functioning (IQ) at 36 months of age in children with IUDE. In-utero drug exposed infants (N = 204) identified following delivery at two urban hospitals were compared with a group of non-exposed children (N = 34) matched for maternal age, gestational age and socioeconomic status. The IUDE infants had significantly smaller HC at birth than the non-exposed infants, however by age 36 months the HC was comparable between the two groups. At age 36 months, there was no difference detected in the IQ between the IUDE and non-exposed groups, yet both groups scored almost one standard deviation below the mean for IQ and both groups were below but approached the US standard HC mean at the same age. Further studies of the more subtle effects of prenatal drug exposure such as attention, impulse control and state regulation on developmental outcomes are recommended as these children mature.