The functional maturity of the gastrointestinal system is essential for the survival of the neonate. The effects of reducing placental size and the ensuing fetal growth retardation on the development of the small intestine (SI) of the sheep fetus were investigated. At 140 days of gestation (term is 147 days), fetal body weight, gastrointestinal weight (from the abomasum to the rectum, i.e., the gut), SI weight, and SI length in the growth-retarded fetuses (n = 6) were significantly reduced (p < 0.05) when compared with age- and breed-matched control fetuses. The SI weight was disproportionately reduced as a fraction of the gut weight or SI length (p < 0.01). The proximal SI showed marked reductions in the thickness of the wall, muscularis externa, mucosa, villus height, and crypt depth (p < 0.003). Densities of villi and crypts were also reduced (p < 0.02). The crypt-to-villus ratio was maintained. Glycogen was accumulated basally in the villus epithelial cells, and their nuclei were located apically. These characteristics are comparable to those of much younger fetuses. In the distal SI, interanimal variation was large; however, the mean thickness of the wall, the muscularis externa, the mucosa, and the villus height were all reduced (p < 0.05). In this region, the density of villi and crypts, the pattern of glycogen accumulation, and the position of the nuclei did not markedly differ between growth-retarded and control fetuses. Villus cell density was increased (p < 0.01). Thus, fetal growth retardation due to placental insufficiency affects the proximal and distal SI with different degrees of severity, with thinning of the SI wall, a reduction of the surface area available for absorption, reduced epithelial regenerative capacity, and possibly a retardation of normal epithelial maturation.