Neonatal physical dependence on opioids occurs in two ways: (1) through passive exposure in utero from maternal ingestion of drugs such as heroin or methadone or (2) through the administration of opioids such as morphine, fentanyl, or methadone for analgesia and sedation in the NICU. This article provides a comprehensive review of the mechanisms of opioid tolerance, physical dependence, and withdrawal specific to the neonate. Particular emphasis is given to the assessment of iatrogenic neonatal abstinence syndrome in the ill neonate and to its prevention and management in the NICU.