Advances in methodology have led to expanded application of resting-state functional MRI (rs-fMRI) to the study of term and prematurely born infants during the first years of life, providing fresh insight into the earliest forms of functional cerebral development. In this review, we detail our evolving understanding of the use of rs-fMRI for studying neonates. We initially focus on the biological processes of cortical development related to resting-state network development. We then review technical issues principally affecting neonatal investigations, including the effects of subject motion during acquisition and image distortions related to magnetic susceptibility effects. We next summarize the literature in which rs-fMRI is used to study normal brain development during the early postnatal period, the effects of prematurity, and the effects of cerebral injury. Finally, we review potential future directions for the field, such as the use of complementary imaging modalities and advanced analysis techniques.