Thyroid hormones (THs) are essential for brain development, and iodine is required for TH synthesis. Environmental chemicals that perturb the thyroid axis result in modest reductions in TH, yet there is a paucity of data on the extent of neurological impairments associated with low-level TH disruption. This study examined the dose-response characteristics of marginal iodine deficiency (ID) on parameters of thyroid function and neurodevelopment. Diets deficient in iodine were prepared by adding 975, 200, 125, 25, or 0 µg/kg potassium iodate to the base casein diet to produce five nominal iodine levels ranging from ample (Diet 1: 1000 μg iodine/kg chow, D1) to deficient (Diet 5: 25 µg iodine/kg chow, D5). Female Long Evans rats were maintained on these diets beginning 7 weeks prior to breeding until the end of lactation. Dams were sacrificed on gestational days 16 and 20, or when pups were weaned on postnatal day (PN) 21. Fetal tissue was harvested from the dams, and pups were sacrificed on PN14 and PN21. Blood, thyroid gland, and brain were collected for analysis of iodine, TH, and TH precursors and metabolites. Serum and thyroid gland iodine and TH were reduced in animals receiving two diets that were most deficient in iodine. T4 was reduced in the fetal brain but was not altered in the neonatal brain. Neurobehavior, assessed by acoustic startle, water maze learning, and fear conditioning, was unchanged in adult offspring, but excitatory synaptic transmission was impaired in the dentate gyrus in animals receiving two diets that were most deficient in iodine. A 15% reduction in cortical T4 in the fetal brain was sufficient to induce permanent reductions in synaptic function in adults. These findings have implications for regulation of TH-disrupting chemicals and suggest that standard behavioral assays do not readily detect neurotoxicity induced by modest developmental TH disruption.