A decision analytic model was constructed to compare the cost-utility of two strategies for evaluating neonates with sepsis suspected at birth: (1) LP and blood culture on admission, (2) LP only if admission blood culture is positive. Neonates in both strategies receive a minimum of three days of parenteral antibiotics. We defined a strategy adding less than $100K in direct neonatal medical costs per quality adjusted life year gained as being cost effective. Probability and neonatal direct medical cost ($US 1993) data were obtained from the literature and clinical estimates. Quality adjusted life expectancy (QALE) was calculated using the Declining Exponential Approximation of Life Expectancy (DEALE) method and Kaplan Index of Well Being. In the baseline analysis, early LP gained 1.8 days of QALE at an additional cost of$1,634, or $331K per quality adjusted life year gained, and prevented death or disability in 2 of 10,000 newborns evaluated. Using sensitivity analysis, we found that the utility decision was sensitive to the probability of disability from meningitis (threshold >20%), the increased risk of disability from partially threated meningitis (threshold >23% higher than fully treated), and the sensitivity of blood culture for detecting meningitis (threshold<87%). Higher costs associated with early LP were largely due to excess hospital days resulting from false positives. Using our lowest estimate of hospital cost ($300/day) and highest estimate of excess risk of disability from partial treatment, twice that of fully treated, decreased the additional cost of early LP to $561, gained 5.1 days of QALE, or $40K per quality adjusted life years gained, and prevented death or disability in 5 of 10,000 newborns evaluated. Using our initial probability and cost estimates, we found that including LP in the initial evaluation of suspected early onset neonatal sepsis is not cost effective. This decision is sensitive to estimates of meningitis morbidity and hospital costs. Additional data quantifying these variables are needed.