Detection of the degenerative changes of neutrophils (D.C.N.) including vacuolization and toxic granulation in peripheral blood smear can be of value in identifying neonates with infection. A prospective study of 264 neonates who required septic work-ups in the first month of life was conducted. Thirty neonates were proved to have sepsis subsequently. The accuracy of the degree of the D.C.N. to predict neonatal sepsis was assessed. Vacuolization and/or toxic granulation in neutrophils varied from 0% to over 50%/100 neutrophils scanned. The higher the degree of D.C.N. the greater was the like- hood of sepsis. The positive predictive accuracy and specificity increased with the degree of D.C.N. from 24.7% to 100% and 70% to 100% respectively, but the sensitivity decreased accordingly. When D.C.N. was less than 10% the chance of sepsis was less than 5%. Most of newborns dying of proven sepsis had higher percentage of D.C.N.. These findings suggest that degree of D.C.N. may be associated with the outcome of the patients. This simple test can be performed easily in all hospital; it does not require special laboratory facilities and provide a valuable adjunct in early detection of severity and outcome of the neonates with sepsis.