Intrauterine infection exacerbates neonatal hypoxic–ischemic (HI) brain injury and impairs the development of cerebral cortex. Here we used low-dose lipopolysaccharide (LPS) pre-exposure followed by unilateral cerebral HI insult in 7-day-old rats to study the pathogenic mechanisms. We found that LPS pre-exposure blocked the HI-induced proteolytic activity of tissue-type plasminogen activator (tPA), but significantly enhanced NF-κB signaling, microglia activation, and the production of pro-inflammatory cytokines in newborn brains. Remarkably, these pathogenic responses were all blocked by intracerebroventricular injection of a stable-mutant form of plasminogen activator protein-1 called CPAI. Similarly, LPS pre-exposure amplified, while CPAI therapy mitigated HI-induced blood-brain-barrier damage and the brain tissue loss with a therapeutic window at 4 h after the LPS/HI insult. The CPAI also blocks microglia activation following a brain injection of LPS, which requires the contribution by tPA, but not the urinary-type plasminogen activator (uPA), as shown by experiments in tPA-null and uPA-null mice. These results implicate the nonproteolytic tPA activity in LPS/HI-induced brain damage and microglia activation. Finally, the CPAI treatment protects near-normal motor and white matter development despite neonatal LPS/HI insult. Together, because CPAI blocks both proteolytic and nonproteolytic tPA neurotoxicity, it is a promising therapeutics of neonatal HI injury either with or without infection.