Background: Preliminary studies suggest that fish‐oil lipid emulsion given parenterally to very preterm infants reduces the severity of retinopathy (ROP) and cholestasis. Methods: Infants weighing <1250 g at birth were randomly allocated to 2 groups: an experimental group of 60 infants that received an intravenous (IV) soybean, olive oil, and fish oil emulsion, and a control group of 70 infants that was given a parenteral soybean and olive oil emulsion. Plasma and erythrocyte concentrations of docosahexaenoic acid (DHA) were determined using a high‐performance liquid chromatography–mass spectrometry analysis. Results: Nine infants in the fish oil group required laser therapy for ROP compared with 22 infants in the standard intralipid group (risk ratio [RR], 0.48; 95% confidence interval [CI], 0.24–0.96). Three infants in the fish oil group developed cholestasis compared with 20 infants in the standard intralipid group (RR, 0.18; 95% CI, 0.055–0.56). The mean plasma DHA concentrations in treated infants were 2.9‐fold higher in the fish oil group than in control infants on the 7th and 14th days of life. The mean DHA content in erythrocytes of treated infants was 4.5‐fold and 2.7‐fold higher compared with controls at 7 and 14 days of age. Conclusions: Premature infants receiving an IV fat emulsion containing fish oil had less ROP requiring laser treatment and less cholestasis than those receiving a standard lipid emulsion. These infants also had higher plasma and erythrocyte DHA levels at 7 and 14 days, suggesting potential long‐term neurodevelopmental benefits.