Our aim was to assess the effect of intrauterine growth retardation on neurosensory development by evaluating brainstem auditory evoked responses (BAER) in term small for gestational age (SGA) newborn infants born to undernourished mothers. This prospective clinical study included 25 singleton healthy SGA newborn infants born between 38 and 41 weeks to undernourished mothers (weight <45kg, height <145cm, haemoglobin <8g/dl, and serum albumin <2.5g/dl). An equal number of age- and sex-matched appropriate for gestational age newborn infants born to healthy mothers served as controls. Mothers with other risk factors and newborns with complications during delivery or immediate newborn period were excluded. BAER was recorded within first 3 days of life. Interpeak latency (IPL), absolute peak latency (APL) and amplitudes of various waveforms were determined and compared between the groups. No statistically significant differences were observed for the mean interpeak and absolute latencies between term SGA and AGA infants (p>0.05). The absolute peak latency (wave V) and central conduction time (I-V interval) were borderline prolonged in the study group compared with controls (p=0.051 and 0.088 respectively). Using multiple regression analysis, maternal haemoglobin was identified to be the only parameter having a negative correlation with both IPL (waves I-V) (F[1,46]=4.12, p=0.048) and APL (wave V) (F[1,46]=5.80, p=0.02). Maternal undernourishment may have a minor effect on intrauterine development of the auditory brainstem. Maternal haemoglobin is the only factor significantly associated with these changes.