Hypothyroidism is considered to be the most common cause of mental retardation. Thyroid appears to mature by 12th week post conception. Iodine is used in synthesis of thyroid hormones and is a dietary requirement. Iodine deficiency during the first (and to some extent the second) trimester has serious consequences.
Most of T4 (thyroxine) is synthesized by thyroid and some T3 (triiodothyronine) as well. T4 and T3 crosses Blood Brain Barrier in Adults. In the developing brain, T4 passes more easily than T3 into the brain tissue. An increase in circulating T3 doesn't increase cerebral T3 in the developing brain. What gives these hormones much power is that they are able to delay gene transcription even though they don't stop it. For example, the Reelin gene that is necessary for ordered migration of developing cells across the cortical layers is regulated by thyroid hormones. In a normal cortex, the oldest neurons are in layer 6 while the newer ones traverse past to go to the layers above. In the Reeler cortex, the newest neurons fail to traverse older neurons in the lower layers and reach Layer II/III/IV/V. Interestingly, hypothyroidism is correlated with lesser myelination when the axonal diameters are less than a critical diameter.
Thyroid seems to affect neuronal migration, proliferation, the laminar effect, synaptogenesis, neuritogenesis... regulates bdnf and nt3.
Rukmani brought up an important point to note about comparing rodent and human studies. The rat model is very good for studying brain development as the sequence of events between rat and humans is similar, proportionate and comparable when we take onset of fetal thyroid action as a reference point. However, when we take birth as a reference point, we need to take into account that postnatal rat brain development is relatively more than human brain development.