This study investigated relations between drug exposure, particularly cocaine, and infants' regulation of arousal in response to novelty. Sixty-three infants — 36 cocaine exposed and 27 non-cocaine exposed — participated at 3 months of age in a novel-repeat stimulus presentation procedure. Arousal was operationalized in terms of infant behavioral state, affective expressiveness, and attention to the stimulus. Infants were tested and infant behaviors were scored by experimenters blind to the drug exposure status of the infant. There were no differences between the two groups in baseline behavioral state or affective expression before the presentation of novel stimuli. Compared to the non-cocaine-exposed group, infants exposed prenatally to cocaine and other drugs were more likely to exhibit a crying state and to display negative affect on novel stimulus presentations. There were no group differences in the amount of looking toward the stimulus. Both groups showed less crying and negative affect when stimuli were presented a second time, but decrements were consistently greater for the cocaine-exposed group. These results obtained when group differences were controlled for sociodemographic and perinatal variables. Sources of differences in the regulation of arousal in cocaine-exposed and non-cocainc-exposed infants are discussed, and impairments in the regulation of arousal in cocaine-exposed infants are considered in a framework of predictive implications for children's social and cognitive development.