The incidence of major handicaps was studied in a selected high-risk population of 1919 very low birth weight (less than or equal to 1500 gm) infants born between 1976 and 1985. Seventy-four percent of these infants were discharged alive. We have handicap information on 632 infants who have been followed for up to 7 years of age; 462 were evaluated at 18 months or later. Patients lost to follow-up represent 55% of the eligible population, but inpatient morbidity factors were available for the entire population and were used to calculate synthetic estimates of handicap rates. The overall incidence of severe major handicaps at 18 months was 18.0% (83/462). Cerebral palsy was found in 7.6%, and 6.5% were mentally retarded (IQ less than or equal to 70). Severe retinopathy of prematurity was present in 5.5%, and 5.4% of the infants had neurosensory hearing loss. Thirty-one infants (6.7%) had more than one handicap, the most common combination being cerebral palsy and mental retardation. Outcome of infants grouped by 250 gm birth weight intervals was compared for two periods (1976 to 1980, and 1981 to 1985); the numbers of survivors in each birth weight group increased during the second period, especially in the 500 to 750 gm and the 751 to 1000 gm groups. The observed incidence of major handicaps decreased from the first 5-year period to the second 5-year period (p less than 0.001). The largest decreases in the observed proportion handicapped occurred in the two lowest birth weight groups. The incidence of multiple handicaps also dropped; again, the two lowest birth weight groups showed the largest decrease. We conclude that an increased survival rate of very low birth weight infants need not be associated with an increased incidence of major handicaps.