BACKGROUND Perinatal asphyxia with hypoxic ischemic encephalopathy (HIE) causes significant mortality and morbidity in developing countries. There is limited information about long term neurodevelopmental outcome of infants with neonatal encephalopathy. METHODS Term infants with the diagnosis of perinatal asphyxia were followed up in neurodevelopmental clinics of Manipal Teaching hospital, Nepal. Study design was prospective mixed longitudinal study. Prematurity, major congenital malformations, other intracranial pathology, birth weight <2500g and chromosomal abnormalities were excluded. After consent and enrollment their detailed perinatal history, Apgar score, resuscitation measures and outcome parameters were recorded on a predesigned proforma. Developmental assessment was done with Denver Developmental Screening Tool 2nd edition (DDST 2) at the age of 3months, 6months, 9months, 1year, 18months and 2years. RESULTS Total 187 assessments done in the age group of 3months to 2years among HIE stage 2 patients. Impaired hearing and vision was noted in 5.3% while language delay was observed in 19.2% of infants. Abnormal tone and deep tendon reflexes were noted in 46.2% infants at 3months. Abnormal tone and reflexes were noted only in 18.8% and 9.4% respectively at the age of 2years. Overall, gross motor delay was noted in 55(29.4%) of patient, 34(18.2%) showed fine motor delay and 17.1% social delay. Seizures were persistent in 15.6% patients at 2years age. CONCLUSIONS Infants affected with HIE have delay in all sectors of developmental milestones. Motor abnormalities are common and tend to improve with advancing age.