Objective. - To examine the effects of neonatal intensive care unit (NICU) patient volume and the level of NICU care available at the hospital of birth on neonatal mortality. Design. - Birth certificate data linked to infant death certificates and to infant discharge abstracts were used in a logistic regression model to control for differences in each patient's clinical and demographic risks. Hospitals were classified by the level of NICU care available (no NICU: level I; intermediate NICU: level II; expanded intermediate NICU: level II+: tertiary NICU: level III) and by the average patient census in the NICU. Settings. - All nonfederal hospitals in California with maternity services. Patients. - All births in nonfederal hospitals in California in 1990 (N=594 104), 473209 (singletons only) of which were successfully linked with discharge abstracts. Of these infants, 53229 were classified as likely NICU admissions. Main Outcome Measures. - Death within the first 28 days of life, or within the first year of life, if continuously hospitalized. Results. - Patient volume and level of NICU care at the hospital of birth both had significant effects on mortality. Compared with hospitals without an NICU, infants born in a hospital with a level III NICU with an average NICU census of at least 15 patients par day had significantly lower risk-adjusted neonatal mortality (odds ratio, 0.62; 95% confidence interval, 0.47-0.82; P=.002). Risk-adjusted neonatal mortality for infants loom in smaller level III NICUs, and in level II+ and level II NICUs, regardless of size, was not significantly different from hospitals without an NICU, and was significantly higher than hospitals with large level III NICUs. Conclusions. - Risk-adjusted neonatal mortality was significantly lower for births that occurred in hospitals with large (average census, >15 patients per day) level III NICUs. Despite the differences in outcomes, costs for the birth of infants born at hospitals with large level III NICUs were not mere than those for infants born at other hospitals with NICUs. Concentration of high-risk deliveries in urban areas in a smaller number of hospitals that could provide level III NICU care has the potential to decrease neonatal mortality without increasing costs.