Neonatal hypoxic-ischaemic (HI) brain injury resulting in encephalopathy is a leading cause of morbidity and mortality with no effective treatment. Here we show that caffeic acid phenethyl ester (CAPE), an active component of propolis, administered either before or after an HI insult, significantly prevents HI-induced neonatal rat brain damage in the cortex, hippocampus and thalamus. In addition to blocking HI-induced caspase 3 activation, CAPE also inhibits HI-mediated expression of inducible nitric oxide synthase and caspase 1 in vivo and potently blocks nitric oxide-induced neurotoxicity in vitro. Furthermore, CAPE directly inhibits Ca2+-induced cytochrome c release from isolated brain mitochondria. Thus, CAPE induces neuroprotection against HI-induced neuronal death, possibly by blocking HI-induced inflammation and/or directly inhibiting the HI-induced neuronal death pathway. CAPE may therefore be a novel effective therapy for preventing neonatal HI injury.