Anemia of prematurity (AOP) is a common condition with a well-described chronology, nadir hemoglobin levels, and timeline of recovery. However, the underlying pathophysiology and impact of prolonged exposure of the developing infant to low levels of hemoglobin remains unclear. Phlebotomy losses exacerbate the gradual decline of hemoglobin levels which is insidious in presentation, often without any clinical signs. Progressive anemia in preterm infants is associated with poor weight gain, inability to take oral feeds, tachycardia and exacerbation of apneic, and bradycardic events. There remains a lack of consensus on treatment thresholds for RBC transfusion which vary considerably. This review elaborates on the current state of the problem, its implication for the premature infant including association with subphysiologic cerebral tissue oxygenation, necrotizing enterocolitis, and retinopathy of prematurity. It outlines the impact of prophylaxis and treatment of anemia of prematurity and offers suggestions on improving monitoring and management of the condition.