All 107 infants weighing < or = 1500 g at birth (VLBW) and born alive in the south-east region of Sweden during a 15-month period in 1987-88 were enrolled in a prospective study to determine the prevalence of handicap and to assess neurological function in comparison with controls. Eighty-six (80%) infants survived. Twenty (19%) had intracranial haemorrhages (ICH) assessed by ultrasound examinations in the neonatal period and 2 (2.3%) retinopathy of prematurity stage 3 or more. The VLBW infants who survived had fewer optimal neurological responses than the controls at 40 weeks post-conceptional age. Eighty-two VLBW children were followed to 4 y of age. Three (4%) children had a neurological handicap and 9 (11%) had a moderate neurological deviation. Neither the size of ICH nor neonatal optimality score correlated to neurological outcome at 4 y of age. The VLBW children without neurological handicap or deviation (n = 70) had a delay in psychomotor development in comparison with the controls. Mental development and school performance, in particular language development, will be examined at school age.