To determine the incidence of subependymal (SEH) or intraventricular hemorrhage (IVH) and its short-term outcome, infants of less than 35 weeks' gestation who required intensive care were evaluated and computerized tomographic scans obtained. If the scans showed blood, serial scans were followed until the hemorrhage had resolved and ventricle size was stable. Hemorrhage was quantitated; Seventy-seven of 191 (40.3%) infants were shown to have SEH, IVH, or both; 22 of them (28%) died, and hemorrhage was thought to be the primary cause of death in 17. Fifty-five survivors (71%) with SEH, IVH, or a combination of the two had serial follow-up scans. Six had SEH alone; 49 had IVH. Severe progressive hydrocephalus developed in 12 (22%) infants. Thirty-seven (75.5%) die not show progressive hydrocephalus. The degree of hemorrhage in these 37 was mild in 14, moderate in 13, and marked in 10. Of those with progressive hydrocephalus, hemorrhage was marked in 8 and moderate in 4. Hydrocephalus resolved spontaneously in 4 of the 12. Medical treatment (repeated lumbar punctures) was successful in 3, but failed in 4. Hydrocephalus was managed by shunt surgery in 5. This study revealed that the quantity of blood is prognostically important with regard to both survival (p less than 0.001) and development of progressive hydrocephalus (p less than 0.05). Furthermore, hydrocephalus, even if progressive, may not necessitate surgical management;