Fetal intrauterine distress (FD) during delivery can cause fetal intrauterine hypoxia, posing significant risks to the fetus, mother, and newborns. While studies highlight the role of polymorphonuclear myeloid-derived suppressor cells (PMN-MDSCs) in neonatal diseases and tumor hypoxia, their specific involvement in newborns experiencing fetal distress during delivery (FDNB) is not well understood. Here, we found elevated PMN-MDSC activation, increased glycolysis, enhanced lactate production, and upregulated HIF-1α expression in the blood of FDNB neonates compared to healthy newborns (NNB). Importantly, PMN-MDSC levels were inversely correlated with neuron-specific enolase (NSE), a marker for neurological injury. In neonatal mice subjected to acute hypoxia, a 48-h exposure led to a shift from exacerbation to amelioration of brain damage when compared with a 24-h period. This change was associated with a reduction in microglial activation, a decrease in the expression of inflammatory factors within the microglia, alongside increased peripheral PMN-MDSC activation. Depleting PMN-MDSCs led to heightened microglial activation and aggravated brain injury. Mechanistically, enhanced activation of PMN-MDSCs promotes HIF-1α accumulation while enhancing glycolysis and lactate release, thereby mitigating neonatal brain injury. Notably, lactate supplementation in hypoxic mice rescued brain damage caused by insufficient PMN-MDSC activation due to HIF-1α deficiency. Our study clarifies the role of lactate in peripheral PMN-MDSCs after acute hypoxia and its effects on microglial activation and subsequent brain injury.