Neonatal jaundice (NJ) and sepsis are common causes of neonatal mortality in sub-Saharan Africa, but little is known about the long-term morbidity in this setting. This study aimed to describe the neurological and developmental sequelae of severe neonatal hyperbilirubinaemia and neonatal sepsis (NS) in a district hospital in rural Kenya. Twenty-three term infants with NJ [total serum bilirubin (TSB) >300 μmol/l] and 24 infants with a history of NS were identified from hospital records. These children were compared to 40 children from the community (CC) without neonatal problems. At ages 18–32 months, the children's neurological, motor and developmental status were assessed, and blood groups of the NJ and NS subjects and their mothers were determined. Ten (43%) of the NJ subjects were unable to sit and/or stand independently. The NJ subjects had significantly more neurological, motor and developmental difficulties and caused greater maternal concern than the CCs. Five (21%) of the NJ subjects had possible blood group incompatibility. The NS subjects had significantly more motor and eye-hand difficulties and maternal concerns expressed than the CCs. Severe NJ in term infants (of mainly non-haemolytic origin) was associated with a high prevalence of neurological and developmental sequelae at ages 18–32 months. The NS is also associated with neuro-developmental sequelae, but the pattern is different to those seen in NJ. Since NS is common in resource poor countries, this may be an important cause of neuro-developmental impairment in children living in this setting.