For a variety of anatomic and physiologic reasons, premature infants, especially those of very low birth weight, are most likely to sustain an intraventricular hemorrhage (IVH) and subsequent posthemorrhagic hydrocephalus (PHH). When to initiate treatment and what that treatment should be remains controversial. This article discusses the pathophysiology and clinical presentation of IVH and PHH and provides a guideline for when and how to treat hydrocephalus in this population. Fibrinolytic therapy and neurodevelopmental outcomes are reviewed.