Ureaplasma infection of the amniotic cavity is associated with adverse postnatal intestinal outcomes. We tested whether interleukin-1 (IL-1) signaling underlies intestinal pathology following ureaplasma exposure in fetal sheep. Pregnant ewes received intra-amniotic injections of ureaplasma or culture media for controls at 3, 7, and 14 d before preterm delivery at 124 d gestation (term 150 d). Intra-amniotic injections of recombinant human interleukin IL-1 receptor antagonist (rhIL-1ra) or saline for controls were given 3 h before and every 2 d after Ureaplasma injection. Ureaplasma exposure caused fetal gut inflammation within 7 d with damaged villus epithelium and gut barrier loss. Proliferation, differentiation, and maturation of enterocytes were significantly reduced after 7 d of ureaplasma exposure, leading to severe villus atrophy at 14 d. Inflammation, impaired development and villus atrophy of the fetal gut was largely prevented by intra-uterine rhIL-1ra treatment. These data form the basis for a clinical understanding of the role of ureaplasma in postnatal intestinal pathologies.