Methadone is used for medication-assisted treatment of heroin addiction during pregnancy. The neurodevelopmental outcome of children with prenatal methadone exposure can be sub-optimal. We tested the hypothesis that brain development is altered among newborn infants whose mothers were prescribed methadone. 20 methadone-exposed neonates born after 37 weeks' postmenstrual age (PMA) and 20 non-exposed controls underwent diffusion MRI at mean PMA of 39+ 2 and 41+ 1 weeks, respectively. An age-optimized Tract-based Spatial Statistics (TBSS) pipeline was used to perform voxel-wise statistical comparison of fractional anisotropy (FA) data between exposed and non-exposed neonates. Methadone-exposed neonates had decreased FA within the centrum semiovale, inferior longitudinal fasciculi (ILF) and the internal and external capsules after adjustment for GA at MRI (p < 0.05, TFCE corrected). Median FA across the white matter skeleton was 12% lower among methadone-exposed infants. Mean head circumference (HC) z-scores were lower in the methadone-exposed group (- 0.52 (0.99) vs 1.15 (0.84), p < 0.001); after adjustment for HC z-scores, differences in FA remained in the anterior and posterior limbs of the internal capsule and the ILF. Polydrug use among cases was common. Prenatal methadone exposure is associated with microstructural alteration in major white matter tracts, which is present at birth and is independent of head growth. Although the findings cannot be attributed to methadone per se, the data indicate that further research to determine optimal management of opioid use disorder during pregnancy is required. Future studies should evaluate childhood outcomes including infant brain development and long-term neurocognitive function.