Intraventricular hemorrhage (IVH) results in neural cell death and white matter injury in premature infants. No therapeutic strategy is currently available against this disorder. Bone morphogenetic protein (BMP) signaling suppresses oligodendrocyte development through basic-helix-loop-helix (bHLH) transcription factors and promotes astrocytosis. Therefore, we hypothesized that IVH in premature newborns initiates degeneration and maturation arrest of oligodendrocyte lineage and that BMP inhibition alleviates hypomyelination, gliosis, and motor impairment in the survivors of IVH. To test the hypotheses, a rabbit model of IVH was used in which premature rabbit pups (E29) are treated with intraperitoneal glycerol at 2 hours of age to induce IVH; and the pups with IVH exhibit hypomyelination and gliosis at 2 weeks of postnatal age. Maturation of oligodendrocyte lineage was evaluated by specific markers, and the expression of bHLH transcription factors was assessed. BMP levels were measured in both premature rabbit pups and autopsy materials from premature infants. Recombinant human noggin was used to suppress BMP action; and neurobehavioral performance, myelination and gliosis were assessed in noggin-treated pups compared with untreated controls. We found that IVH resulted in apoptosis and reduced proliferation of oligodendrocyte progenitors, as well as arrested maturation of preoligodendrocytes in rabbits. BMP4 levels were significantly elevated in both rabbit pups and human premature infants with IVH compared with controls. Importantly, BMP inhibition by recombinant human noggin restored the levels of phospho-Smad1/5/8, Olig2 transcription factor, oligodendrocyte maturation, myelination, astrocyte morphology, and motor function in premature pups with IVH. Hence, BMP inhibition might enhance neurological recovery in premature infants with IVH.