Dwarf galaxies pose significant challenges for cosmological models. In
particular, current models predict a dark matter density that is divergent at
the center, in sharp contrast with observations which indicate an approximately
constant central density core. Energy feedback, from supernova explosions and
stellar winds, has been proposed as a major factor shaping the evolution of
dwarf galaxies. We present detailed cosmological simulations with sufficient
resolution both to model the relevant physical processes and to directly assess
the impact of stellar feedback on observable properties of dwarf galaxies. We
show that feedback drives large-scale, bulk motion of the interstellar gas
resulting in significant gravitational potential fluctuations and a consequent
reduction in the central matter density, bringing the theoretical predictions
in agreement with observations.