Oxygen was given to babies more than any other medicinal product. The free use of oxygen for abolishing periodic breathing in the 1940’s led to a high incidence of retrolental fibroplasia. The first, largest landmark trial on oxygen use in neonatal medicine confirmed the detrimental effect of high concentrations of oxygen. As a result, the concentration of oxygen for premature babies was generally restricted to 40% from that time. Children are not small adults, and neonates are not small children. The physiological processes in the neonates are unique and are always at a critical threshold. Recent advances in monitoring patient-oxygenation together with a better understanding of the physiology of oxygen transport in health and disease have considerably advanced our knowledge in the area of oxygen therapy. The application of this knowledge, coupled with the use of modern day technology available in this field, will allow for a more rational use of oxygen in neonatal practice.