Background: While behavioral studies have established that prenatal alcohol exposure (PAE) can result in diminished arithmetic processing capability, the underlying neural correlates of this deficit are still unclear. The aim of the present study was to use functional magnetic resonance imaging to determine the effect of PAE on neuronal activation during a subtraction task. Methods: Participants were young adults from a low socio-economic status population who were identified prenatally; the sample consisted of healthy unexposed controls (n = 17) and PAE who were subdivided based on the presence (n = 19) or absence of physical dysmorphic signs (n = 18). Multiple regression analysis was used to determine extent of activation and percent signal change during arithmetic processing, using a letter-matching task as the baseline. Region of interest analysis of activation was performed in the native space and normalized for each individual to compensate for the considerable variability in head size observed in the alcohol-exposed population. Results: An exposure-dependent response was observed in task performance and neuronal activation. Dysmorphic PAE individuals showed significantly lower task-related performance and activation in regions known to be associated with arithmetic processing, including left superior and right inferior parietal regions and medial frontal gyrus, while the nondysmorphic PAE group was generally intermediate but not significantly different from the control group in task performance and activation. Conclusions: Results indicate that there is a range of effects of PAE on arithmetic processing and that the severity of this deficit may be dependent on degree of impairment demonstrated by the exposed individual. Evidence of physical dysmorphia may be indicative of functional damage to regions associated with arithmetic calculation, resulting in markedly impaired neuronal recruitment.