Twenty cases of osteomyelitis and/or septic arthritis caused by multiply resistant Staphylococcus aureus were documented in an Australian tertiary neonatal unit between 1981 and 1987. Eighteen (90%) occurred in the 3 years 1985 to 1987, an incidence of 9.6/1000 admissions in that period. All osteomyelitis and/or septic arthritis occurred in sick premature infants requiring intensive support. Eleven (55%) had a birth weight of less than 1500 g. An intravascular device was the most common portal of entry (14 of 20, 70%). Systemic symptoms were prominent at presentation, with local signs developing later in 18 (90%), usually within a week. Radiologic changes were almost always present by 10 days; radionuclide bone scanning was insensitive and did not hasten diagnosis. Osteomyelitis was multifocal in 11 cases (55%), with the long bones, particularly of the upper limb, most commonly affected. Large joint involvement was uncommon (15%). Intravenous vancomycin for a mean of 32 days was associated with low mortality (1 of 20) and toxicity; surgical drainage was not performed. Follow-up at a minimum of 4 months (mean, 25.5 months) showed residual signs in the affected limb in 30%, none with significantly impaired function. Skeletal infection should be searched for rigorously in neonatal multiply resistant S. aureus sepsis. In the absence of large joint disease, vancomycin therapy alone for a minimum of 3 weeks gives good short term results with minimal toxicity.