Background: Early recognition and diagnosis of neonatal sepsis are difficult because of the variable and non-specific clinical presentation of this condition. It is extremely important to make an early diagnosis of neonatal sepsis for the prompt institution of anti-microbial therapy, which improves outcomes. Aims: The aim of this study is to determine the diagnostic performance of Procalcitonin (PCT) and C-Reactive Protein (CRP) as early diagnostic markers in detection of neonatal sepsis in intensive neonatal care unit in comparison to that of blood culture and haematological parameters like micro ESR and Total WBC count. Methods and Materials: This prospective study was conducted on neonates admitted to neonatal intensive care unit (NICU) at Tirunelveli Medical College Hospital, Tirunelveli, Tamil Nadu, India from July' 2010 and August' 2010. Specimens of blood (n = 50) were obtained from each neonate prior to commencement of antibiotics for sepsis work up including haematological parameters like Erythrocyte sedimentation rate, Total laeukocyte count, absolute neutrophil count (ANC), immature neutrophils to total neutrophil count ratio (I/T ratio), platelet count, degenerative changes in the neutrophils. Blood culture and Antibiotic sensitivity test were carried out. Serum CRP level was measured using A-15 CRP Kit by immunoturbidimetric method. Serum PCT level was measured using quantitative immuno-luminometry method by Lumitest kit. Statistical Analysis Used: Data were expressed as mean +/- SD and statistical significance was assessed by the Chi-square test. Results: 50% (7/14) of the neonates with sepsis had raised CRP levels > 6 mg/lit. About 43.7 % (7/16) of the neonates with suspected sepsis and 20 % (4/20) of the neonates with clinical sepsis had raised CRP levels. The sensitivity of CRP for predicting sepsis was 50.0 %, its specificity was 69.4 %, its positive predictive value was 38.8 % and its negative predictive value was 78.1 %. Most (64.3% or 9/14) of the infants with sepsis had PCT levels = 10 ng/ml. Out of 50 cases, elevated PCT was detected in 22, whereas CRP was noticed only in 18 cases. Among the 14 culture positive cases, elevated serum PCT level was noticed in 13 (92.85 %) cases whereas CRP level was noticed in 7 (50 %) cases. The sensitivity of the PCT in detecting sepsis was 92.8 %, its specificity 75.0 %, its positive predictive value was 59.0 % and its negative predictive value was 96.0 %. The altered haematological parameters were only noticed in 7-14 % cases. Conclusions: In this study serum procalcitonin level was superior to serum CRP level in terms of early diagnosis of neonatal sepsis, in detecting the severity of the illness and in evaluation of the response to antibiotic treatment. The PCT concentration in our study was elevated in culture positive neonates. In some cases of culture positive babies other sepsis screening tests were negative but the level of PCT was elevated. These findings support the usefulness of the PCT to establish an early diagnosis of neonatal sepsis.