Standardized individual psychoeducational school-readiness tests were completed by 127 nondisabled survivors of moderate (lethargy, hypotonia, and suppressed primitive reflexes) or mild (hyperalertness, hyperexcitibility) neonatal encephalopathy associated with term birth asphyxia. Application of the readiness test battery to the children with moderate or mild encephalopathy and a peer population, revealed that children with moderate encephalopathy had significantly lower scores for many tests than those in the other groups. Children with mild encephalopathy performed well. We found no significant differences due to social variables. For the moderate group, we found an increased number of types of anticonvulsants and abnormal findings on the neurologic examination at neonatal intensive care unit (NICU) discharge to be predictors of low achievement on school-readiness tests. Also for the nondisabled moderate group, multiple regression analysis of the independent variables with the 5.5-year scores added variables suggestive of intrauterine growth retardation to the prediction of lower scores on many school-readiness tests. We conclude that clinical categorizing of moderate neonatal encephalopathy associated with birth asphyxia in term infants selects a group of children with an increased percentage of school-readiness delay, and could be a useful indicator for clinicians and educators in defining those neonates who may need special preschool evaluation and benefit from a modified early school program.