We developed a 375-channel, whole-head magnetoencephalography (MEG) system (“BabyMEG”) for studying the electrophysiological development of human brain during the first years of life. The helmet accommodates heads up to 95% of 36-month old boys in the USA. The unique two-layer sensor array consists of: (1) 270 magnetometers (10 mm diameter, ∼15 mm coil-to-coil spacing) in the inner layer, (2) thirty-five three-axis magnetometers (20 mm × 20 mm) in the outer layer 4 cm away from the inner layer. Additionally, there are three three-axis reference magnetometers. With the help of a remotely operated position adjustment mechanism, the sensor array can be positioned to provide a uniform short spacing (mean 8.5 mm) between the sensor array and room temperature surface of the dewar. The sensors are connected to superconducting quantum interference devices (SQUIDs) operating at 4.2 K with median sensitivity levels of 7.5 fT/√Hz for the inner and 4 fT/√Hz for the outer layer sensors. SQUID outputs are digitized by a 24-bit acquisition system. A closed-cycle helium recycler provides maintenance-free continuous operation, eliminating the need for helium, with no interruption needed during MEG measurements. BabyMEG with the recycler has been fully operational from March, 2015. Ongoing spontaneous brain activity can be monitored in real time without interference from external magnetic noise sources including the recycler, using a combination of a lightly shielded two-layer magnetically shielded room, an external active shielding, a signal-space projection method, and a synthetic gradiometer approach. Evoked responses in the cortex can be clearly detected without averaging. These new design features and capabilities represent several advances in MEG, increasing the utility of this technique in basic neuroscience as well as in clinical research and patient studies.