During a 36-month period 435 babies of 34 weeks' gestation or less were regularly scanned with ultrasound. A large periventricular/intraventricular haemorrhage developed in 40 babies, and extensive cystic leucomalacia developed in 10. The neurodevelopmental outcome and the frequency of handicap in these 2 groups were compared. 9 of the 18 survivors with a large haemorrhage were found to be completely normal and only 2 showed a major handicap. However, severe cerebral palsy with mental retardation developed in all the survivors with extensive cystic leucomalacia, and 4 of the 7 babies were also cortically blind. These findings suggest that the size of the haemorrhage is not a good predictor of outcome, but that severe cystic leucomalacia is associated with a very poor prognosis.