Tinea capitis, the most common fungal infection in children, is rare in neonates. We report six patients in a Level II intermediate care nursery who developed nosocomial dermatophyte infections caused by Microsporum canis. The investigation, which led to the identification of a nurse as the common source, is described. The nurse had an indolent infection with M. canis. Human to human transmission is exceedingly rare for M. canis. The literature regarding neonatal dermatophyte infections is discussed in relation to the reported outbreak.