The objective of this study was to identify a short list of valid signs for the development of standard case management guidelines for severe bacterial infection (SBI) in newborn infants, an important cause of neonatal deaths in low-income countries. The reported and observed signs of 83 sick neonates admitted during 12 consecutive months were recorded. At discharge, 50 cases were classified, using predefined criteria, as SBI, mostly pneumonia, and 33 as other disease. The neonates with other diseases were significantly younger than those with SBI. None of the reported and observed signs, when used alone, had a high sensitivity, an important feature for a severe disease amenable to effective treatment. The best sensitivity (74 per cent) was obtained when a doctor observed severe chest indrawing or fast breathing or 'not looking well'; the specificity was 67 per cent and the positive predictive value 77 per cent. The sensitivity of reported difficult breathing and of observed severe chest indrawing, when measured only for the diagnosis of pneumonia, improved to 77 per cent, with a specificity of 84 per cent and 66 per cent, respectively. Reported fever and the observation that the neonate was 'not looking well' were the best independent predictors of SBI on logistic regression analysis. Simple standard case management (SCM) guidelines based only on reported and observed clinical signs would not identify the majority of neonates with SBI at primary health care level.