Located next to the existing Jane Crookall Maternity Ward, the £4m facility is the first major extension to Noble's Hospital in Braddan since it opened in 2003.
Alfred Cannan MHK said it is a "substantial investment in a vital service to protect the vulnerable".
The government said the unit has been delivered "to budget and on time" and conforms to British and EU standards.
Dr Prakash Thiagarajan, a consultant paediatrician and neonatologist at the hospital, said the "first-class facilities will help us offer the best possible care. It will also help us to deliver the necessary support to parents."
A health spokesman said the current capacity of nine cots remains the same, but the new facility provides additional overnight accommodation for parents, space to improve isolation, resuscitation and privacy, as well as additional room for the storage of vital equipment.
A new intensive care unit for newborn babies has opened on the Isle of Man.