Prenatal exposure to maternal depression increases the risk for onset of emotional and behavioral disorders in children. We investigated the effects of exposure to prenatal depression on white matter microstructural integrity at birth and at 2-3 years, and associated neurodevelopment. Diffusion-weighted images were acquired for children of the Drakenstein Child Health Study at 2-4 weeks postpartum (n=70, 47% boys) and at 2-3 years of age (n=60, 58% boys). Tract-Based Spatial Statistics was used to compare, using an ROI based approach, diffusion tensor metrics across groups defined by presence (>19 on Beck's Depression Inventory and/or >12 on the Edinburgh Postnatal Depression Scale) or absence (below depression thresholds) of depression, and associations with neurodevelopmental measures at age 2-3 years were determined. We did not detect group differences in white matter integrity at neonatal age, but at 2-3 years, children in the exposed group demonstrated higher fractional anisotropy, and lower mean and radial diffusivity in association tracts compared to controls. This was notable in the sagittal stratum (radial diffusivity: p<0.01). Altered white matter integrity metrics were also observed in projection tracts, including the corona radiata, which associated with cognitive and motor outcomes in exposed 2-3-year-olds (p<0.05). Our findings of widespread white matter alterations in 2-3-year-old children with prenatal exposure to depression are consistent with previous findings, as well as with neuroimaging findings in adults with major depression. Further, we identified novel associations of altered white matter integrity with cognitive development in depression-exposed children, suggesting that these neuroimaging findings may have early functional impact.