Prenatal exposure to alcohol causes a wide range of deficits known as fetal alcohol spectrum disorders (FASDs). Many factors determine vulnerability to developmental alcohol exposure including timing and pattern of exposure, nutrition and genetics. Here, we characterized how a prevalent single nucleotide polymorphism in the human brain‐derived neurotrophic factor (BDNF) gene (val66met) modulates FASDs severity. This polymorphism disrupts BDNF's intracellular trafficking and activity‐dependent secretion, and has been linked to increased incidence of neuropsychiatric disorders such as depression and anxiety. We hypothesized that developmental ethanol (EtOH) exposure more severely affects mice carrying this polymorphism. We used transgenic mice homozygous for either valine (BDNFval/val) or methionine (BDNFmet/met) in residue 68, equivalent to residue 66 in humans. To model EtOH exposure during the second and third trimesters of human pregnancy, we exposed mice to EtOH in vapor chambers during gestational days 12 to 19 and postnatal days 2 to 9. We found that EtOH exposure reduces cell layer volume in the dentate gyrus and the CA1 hippocampal regions of BDNFmet/met but not BDNFval/val mice during the juvenile period (postnatal day 15). During adulthood, EtOH exposure reduced anxiety‐like behavior and disrupted trace fear conditioning in BDNFmet/met mice, with most effects observed in males. EtOH exposure reduced adult neurogenesis only in the ventral hippocampus of BDNFval/val male mice. These studies show that the BDNF val66met polymorphism modulates, in a complex manner, the effects of developmental EtOH exposure, and identify a novel genetic risk factor that may regulate FASDs severity in humans. Brain‐derived neurotrophic factor (BDNF) val66met polymorphism modulates how developmental ethanol (EtOH) exposure affects hippocampal development and behavior in mice.