Prenatal cocaine exposure impairs brain development and produces lasting alterations in cognitive function. In a prenatal cocaine exposure mouse model, we found that tangential migration of GABA neurons from the basal to the dorsal forebrain and radial neuron migration within the dorsal forebrain were significantly decreased during the embryonic period. The decrease in the tangential migration occurred early in gestation and normalized by late gestation, despite ongoing cocaine exposure. The decrease in radial migration was associated with altered laminar positioning of neurons in the medial prefrontal cortex. The cocaine exposure led to transient decreases in the expression of Tbr2 and Tbr1, transcription factors associated with intermediate progenitor cells and newborn neurons of the dorsal forebrain, respectively, although neurogenesis was not significantly altered. Since cocaine can modulate brain derived neurotrophic factor (BDNF) expression in the mature brain, we examined whether cocaine can alter BDNF expression in the embryonic brain. We found a transient decrease in BDNF protein expression in the cocaine-exposed embryonic forebrain early in gestation. By late gestation, the BDNF expression recovered to control levels, despite ongoing cocaine exposure. In basal forebrain explants from cocaine-exposed embryos, cell migration was significantly decreased, corroborating the in vivo data on tangential GABA neuron migration. Since BDNF can influence tangential neuronal migration, we added BDNF to the culture medium and observed increased cell migration. Our data suggest that cocaine can alter tangential and radial neuronal migration as well as BDNF expression in the embryonic brain and that decreased BDNF may mediate cocaine's effects on neuronal migration.