We followed nonoperatively 45 neonates with unilateral hydronephrosis and suspected ureteropelvic junction obstruction for 30 months, regardless of the degree of hydronephrosis, shape of diuretic renogram washout curve or initial degree of functional impairment. Of the patients 30 had mild hydronephrosis and no renal deterioration, while 15 had severe hydronephrosis, an obstructed diuretic renogram and markedly decreased hydronephrotic kidney function. During followup percentage and absolute renal function rapidly increased in all patients, hydronephrosis improved in 7 and contralateral compensatory hypertrophy did not develop in any. These findings help to define the natural history of untreated hydronephrosis, suggest that many newborn kidneys with severe hydronephrosis are not obstructed despite even profound initial decreases in renal function and demonstrate that traditional tests for diagnosing obstruction are inaccurate in this age group. Therefore, the methods for assessing obstruction and the indications for surgical intervention in these patients require reexamination.