Sepsis, necrotizing enterocolitis (NEC), and chronic lung disease (CLD) in preterm neonates are associated with significant mortality and morbidity, including long-term neurodevelopmental impairment and socioeconomic burden. Safe and effective drugs for the prevention and treatment of these conditions are urgently needed. Pentoxifylline, a synthetic theobromine derivative, is a non-steroidal immunomodulating agent with unique hemorrheologic effects which has been used in a range of infectious, vascular, and inflammatory conditions in adults and children. The unique properties of pentoxifylline explain its potential benefits in preterm neonates with sepsis, NEC, and CLD, conditions characterized by activation of the inflammatory cytokine cascade, free radical toxicity, and impaired microcirculation. Pentoxifylline has anti-inflammatory properties resulting from inhibition of erythrocyte phosphodiesterase. It lowers blood viscosity and improves microcirculation and tissue perfusion. As a phosphodiesterase inhibitor, pentoxifylline downregulates pro-inflammatory cytokines such as tumor necrosis factor-alpha, interleukin-6, and interferon-gamma. Methylxanthines, including caffeine, theophylline, and theobromine are relatively non-toxic drugs; of these, theobromine is the least toxic. Pentoxifylline-related significant adverse events are thus very rare. Unlike other methylxanthines, pentoxifylline does not have significant cardiac and bronchodilating effects at therapeutic doses. Although it is contraindicated in adults with recent cerebral hemorrhage due to its effect on platelets, red blood cells, and plasma fibrinogen levels, no significant adverse effects including thrombocytopenia and bleeding have been reported in critically ill preterm neonates with sepsis or NEC after treatment with pentoxifylline. Based on data from pilot randomized trials and observational studies, our systematic review suggests that pentoxifylline may reduce mortality and/or morbidity in preterm neonates with sepsis, NEC, and CLD. Results of experimental studies also indicate that pentoxifylline may potentially be beneficial in meconium aspiration syndrome and hypoxic ischemic encephalopathy. Given the substantial burden of sepsis, NEC, and CLD in high-risk preterm neonates, and the findings of this systematic review, pentoxifylline needs to be evaluated urgently as a preventative and therapeutic agent for these conditions in randomized controlled trials that can detect minimal clinically significant effect sizes. Further clinical and experimental studies are also necessary to evaluate whether pentoxifylline is safe and effective in meconium aspiration syndrome and hypoxic ischemic encephalopathy.