Factors relating to water balance in the perinatal and neonatal periods are reviewed. The major areas considered are changes in body water compartments, insensible water loss, and renal function. A most striking feature in all these areas is the wide variation in 'normal' values, both within the same infant with advancing postnatal age and also between infants of the same postnatal age but of different gestational ages. A second feature is the fluctuation caused by changes in environmental conditions, e.g., temperature, humidity, type of warming device, use of phototherapy. Much of the literature on water balance relates to term infants and experimental animals; only for insensible water loss are there studies on infants as small as less than 1000 gm. Because of the developmental changes occurring in these infants, many areas require further study. The last 5 to 10 years have seen marked changes in our approach to the hydration and nutrition of the low birth-weight infant. Despite much experience with new routes and types of fluids and formulas, no method has been shown to be ideal for all situations. In replacing the neonate's ongoing water losses, the clinician strives to maintain normal volume and tonicity of the body fluids, and to prevent clinical and biochemical signs of dehydration or over-hydration. In planning therapy, the clinician is presented with a wide range of possible water requirements, and with a choice of route and type of fluid administration. Each low birth-weight infant must be viewed individually, and once fluid requirements have been estimated, frequent assessment of hydration status is necessary, with appropriately frequent readjustment of the rate of fluid administration.