The use of oral nystatin to prevent fungal colonisation and infection in neonates in the Neonatal Intensive Care Unit (NICU) is still an open question and not yet recommended as a standard of care. To determine whether prophylactic oral nystatin results in a decreased incidence of invasive candidiasis in the newborn infants, a total of 3991 infants were divided randomly into two groups. Group A infants (n = 1995), only those neonates who were identified as yeast carriers (oral moniliasis) were treated with oral nystatin. Group B infants, all neonates who were admitted to the unit received oral nystatin, was routinely administered three times a day. Group A was divided into groups A1 and A2 (who were treated only if identified as yeast carriers). Urine and rectal cultures were taken on admission and then weekly thereafter. There were 215 (14.2%), 27 (5.6%) and 36 (1.8%) patients positive for invasive candidiasis in groups A1, A2 and B respectively. Oral nystatin prophylaxis significantly reduced the invasive candidiasis (P = 0.004) in extremely low-birth weight (ELBW) and very low-birth weight (VLBW) infants. Prophylactic administration of oral nystatine to the ELBW and VLBW infants results in a decreased risk of invasive candidiasis.