The prognostic value of background activity in the neonatal EEG has been well established. Whereas in older children the neonatal EEG is useful in the diagnosis of seizures, in neonates the test also provides a particularly valuable assessment of cerebral functioning following a variety of insults. In this review, the prognostic significance of abnormalities of amplitude, continuity, frequency, symmetry, synchrony, sleep state, and maturation are discussed. Certain abnormalities, such as cerebral electrical inactivity or burst suppression, are highly predictive of outcome, whereas other abnormalities of background activity are associated with more variable outcomes. Since the ill neonate may have more than one abnormality, predicting outcome based on a single EEG feature is discouraged. As in older children, drugs may affect EEG background rhythms. Although abnormalities on the neonatal EEG are not specific for diagnosis, certain EEG patterns may be highly suggestive for the diagnosis of pyridoxine dependency and neonatal herpes encephalitis. In both term and preterm infants, the prognostic value of the neonatal EEG is increased by performing serial studies.