We wanted to determine the incidence, cost, outcome, and patterns of care for neonates requiring mechanical ventilation (MV) in the United States. Using 1994 state hospital discharge data from California and New York, we conducted an observational study of all neonatal hospitalizations (n = 16,405) with MV, comparing outcomes at centers of different technological capability, and generating national projections using census and natality reports. The MV rate was 18 per 1,000 live births. Although the incidence was much higher in lower birth weight (BW) babies, one-third had normal BW. The incidence was higher in boys (20 versus 15.6 per 1,000) and in blacks (29 per 1,000). Hospital mortality was 11.1%, higher in minority groups, and associated with low BW, congenital anomalies, and major hemorrhage. Mean hospital length of stay and costs were 31.1 d and $51,700. Half of all deaths occurred at lower level centers. There are 80,000 cases per year in the United States with 8,500 deaths and total hospital costs of $4.4 billion. We conclude neonatal respiratory failure is common, expensive, and frequently fatal. There are a surprisingly large number of normal BW cases and there are large racial differences.