In developing countries like India the incidence of IUGR is accounting to 1/3rd live births every year. Aim: To study histopathology and Vascular Endothelial Growth Factor levels of placenta of healthy mothers giving birth to Intrauterine growth restricted babies at term. Materials and Methods: The study was conducted from August 2012 to August 2014 over a duration of two years. A total of 70 cases have been selected for present prospective observational study: 35 were study group mothers had delivered IUGR babies and 35 in control group with normal weight babies. Results: The mean birth weight of babies at term from Group A was 2.297 kg and mean birth weight of babies from Group B was 2.796 kg. The difference in the mean birth weight of babies was statistically significant between the two groups (p-value <0.001). The average Ponderal index (PI) in Group A babies is 2.2 which is significantly low and in Group B babies it is 2.7 with statistical significance (p-value <0.001). Placental weight of babies born in study and control group had high statistical significance (p-value 0.000). Conclusion: The structural abnormalities in the placentae of IUGR babies born at term is suggestive of placenta as the causative factor of IUGR. Co-relation of the VEGF levels with weights of the baby were estimated in both the groups and noticed that the VEGF levels were inversely related with the birth weight. In the IUGR babies the expression of VEGF in the placenta was found to be elevated than in the placenta of normal weight babies.