BACKGROUND Perinatal asphyxia is a major cause of neurological morbidity and mortality in India. The purpose of this study was to investigate variations in nucleated red blood cell (NRBC) in blood associated with perinatal asphyxia and its relationship to both the severity and short term prognosis of asphyxia. METHODS A prospective (case-control) study was undertaken at Gandhi Medical College and Associated Hospitals. A total of 100 neonates were included in the study. Levels of NRBC/100 white blood cells (WBC) and absolute NRBC counts in cord blood were compared for 50 asphyxiated (case group) and 50 normal neonates (control group). These parameters were also related to the severity of asphyxia and clinical outcome. RESULTS The number of NRBC/100 WBC in the blood of 50 newborns each in the asphyxiated and in the control group were mean 29.5 ± 26.0, range 7-144 NRBCs/100 WBC and mean ± standard deviation 5.9 ± 2.6, range 3-14 NRBCs/100 WBC respectively (P < 0.01). Using quartile deviation, staging of hypoxic ischemic encephalopathy (HIE) was done on basis of NRBC count and there was 80% agreement between clinical and NRBC staging of HIE. There was a significant (P < 0.01) correlation of the number of NRBC\100 WBC with Apgar scoring, HIE staging and mortality. CONCLUSIONS The NRBCs/100 WBCs can be used as a simple marker for the assessment of severity and early outcome of perinatal asphyxia.