Congenital hypothyroidism (CH) is defined as thyroid hormone deficiency present at birth. Babies with CH who are not identified and treated promptly develop severe mental retardation. Most of the babies with CH do not manifest the typical known signs and symptoms of hypothyroidism, and this is most likely due to transplacental passage of some maternal thyroid hormone in addition to some residual neonatal thyroid function, as might be seen with thyroid hypoplasia, an ectopic gland, or mild dyshormonogenesis. Screening for CH has enabled the virtual eradication of the devastating effects of mental retardation due to sporadic CH in most developed countries of the world. CH is classified into permanent and transient forms, which in turn can be divided into primary, secondary, or peripheral etiologies. Permanent CH refers to a persistent deficiency of thyroid hormone that requires life-long treatment. Transient CH refers to a temporary deficiency of thyroid hormone that is discovered at birth but recovers to normal in the first few months or years of life. In the last several decades, there have been exciting advances in our understanding of fetal and neonatal thyroid physiology. In addition, advances in molecular biology have helped in understanding the early events in thyroid gland embryogenesis, mechanisms of thyroid action in the brain, the molecular basis for many of the inborn errors of thyroid hormonogenesis, and thyroid hormone action. However, many questions and challenges are still not answered. For example, the increasing numbers of surviving small and premature neonates with abnormalities in thyroid function need definite diagnostic criteria and whether they require medical therapy. Another challenge is the dilemma of finding the best screening methodology that is sensitive and cost effective.