Topical oils on baby skin may contribute to development of childhood atopic eczema. A pilot, assessor-blinded, randomized controlled trial assessed feasibility of a definitive trial investigating their impact in neonates. One-hundred and fifteen healthy, full-term neonates were randomly assigned to olive oil, sunflower oil or no oil, twice daily for 4 weeks, stratified by family history of atopic eczema. We measured spectral profile of lipid lamellae, trans-epidermal water loss (TEWL), stratum corneum hydration and pH and recorded clinical observations, at baseline, and 4 weeks post-birth. Recruitment was challenging (recruitment 11.1%; retention 80%), protocol adherence reasonable (79-100%). Both oil groups had significantly improved hydration but significantly less improvement in lipid lamellae structure compared to the no oil group. There were no significant differences in TEWL, pH or erythema/skin scores. The study was not powered for clinical significance, but until further research is conducted, caution should be exercised when recommending oils for neonatal skin.