Necrotizing funisitis is an umbilical cord lesion characterized by perivascular bands of necrotic Wharton jelly containing inflammatory cells in various stages of degeneration. Sixty cases were reviewed histologically. Clinical information was available in 45. Forty-five age-matched infants with acute (nonspecific) funisitis only were used as controls. Infants with necrotizing funisitis had more stillbirths, birth weights below the tenth percentile (small for gestational age [SGA]), infectious complications, and necrotizing enterocolitis. No consistent infectious agents or predisposing maternal factors were found. Cord neovascularization correlated with SGA infants. Necrotizing funisitis occurred in 0.1% of deliveries greater than 20 weeks' gestation. The perivascular bands, likened to the pattern of an Ouchterlony diffusion plate, suggest the presence of a diffusible toxin in the amniotic fluid. The stillbirths and SGA infants may represent the toxin's effect on the fetus. The lack of perivascular necrotic bands around vessels on the placental surface suggests neutralization or more effective clearing of the agent in this region, for reasons as yet undetermined. The factors underlying the cord lesion may contribute to superimposed acute nonspecific vasculitis and chorioamnionitis.