This study comprised 103 preterm infants with a gestational age less than 33 weeks who were born in Tampere University Hospital and who were followed up to two years of age. Sixty-four perinatal variables were compared to ultrasound findings in the neonatal period and neurologic handicap at the age of two years. Duration of hypocarbia (PCO2 < or = 30 mmHg) during the first 72 h and hyperbilirubinemia (the mean level of serum total bilirubin) at three days of age were independently and significantly related to periventricular leukomalacia, but not directly to cerebral palsy. The only perinatal variables related independently and significantly to cerebral palsy at two years of age were periventricular leukomalacia and ventriculomegaly. According to these results, periventricular leukomalacia was the main predictor of cerebral palsy in preterm infants. In addition to hypocarbia, hyperbilirubinemia may also be involved in the pathogenesis of extensive (severe cystic) periventricular leukomalacia.