All babies admitted to the neonatal unit during a period of 41 months were prospectively studied to find out the incidence, aetiology, and outcome of neonatal pneumonia, and the value of routine cultures of endotracheal tubes. Pneumonia of early onset (before age 48 hours) occurred in 35 babies (incidence 1.79/1000 live births). In 20 (57%) it was caused by group B streptococci. Blood cultures showed the presence of organisms in 16 of the 35 (46%). There were 41 episodes of pneumonia of late onset in 39 babies. Thirty six of the 39 were preterm, and 34 were artificially ventilated (10% of all ventilated babies). Endotracheal tube colonisation had occurred in 94% of these, most commonly by Gram negative organisms and Staphylococcus epidermidis. In only one of seven cases with simultaneous bacteraemia was the same organism grown from cultures of the blood. After controlling for gestational age and duration of artificial ventilation there was no difference in the incidence or timing of endotracheal tube colonisation between babies who did and did not have pneumonia of late onset. Ten babies with pneumonia of early onset (29%) died; all were preterm infants. Only one death (2%) was associated with an episode of pneumonia of late onset. Routine surveillance cultures were not helpful in predicting and managing pneumonia of late onset.