Gestational stress may have lasting effects on the physical and neurocognitive development of offspring. The mechanisms that may underlie these effects are of interest. Progesterone and its 5 alpha-reduced metabolites, dihydroprogesterone and 5 alpha-pregnan-3 alpha-ol-20-one (3 alpha,5 alpha-THP), maintain pregnancy, have neurotrophic effects, and can enhance cognitive performance. We hypothesized that some of the deleterious effects of gestational stress on the cognitive performance of offspring may be related to progestogen formation. Pregnant rat dams were exposed to restraint under a bright light (thrice daily for 45 min) on gestational days 17-21 or were minimally handled controls. Dams that were exposed to restraint had lower circulating levels of 3 alpha,5 alpha-THP and significantly greater concentrations of corticosterone at the time of birth than did control dams. Male and female offspring, that were gestationally stressed or not, were cross-fostered to non-manipulated dams. Between postnatal days 28-30, offspring were assessed for object recognition, a prefrontal cortex (PFC)-dependent cognitive task. Restraint-exposed offspring performed more poorly in the object recognition task than did control offspring, irrespective of sex. As well, progesterone turnover to its 5 alpha-reduced metabolites in the medial PFC (but not the diencephalon) was significantly reduced among restraint-exposed, compared to control, offspring. Progesterone turnover, and levels of 3 alpha,5 alpha-THP, positively correlated with performance in the object recognition task. Thus, restraint stress in late pregnancy impaired cognitive development and dysregulated progestogen formation in brain.