Depletion neutropenia caused by overwhelming bacterial infection is associated with fatal outcome and is an objective indicator of the severity of sepsis. Studies on controlled evaluation of exchange transfusion in the management of severe neonatal sepsis have not considered neutropenia as an inclusion critcrion, and randomized, controlled trials on evaluation of ncutrophil functions after exchange transfusion are scarce. This prompted us to carry out the present study. Septicemic neonates were enrolled if they had neutropenia and were randomized to undergo exchange transfusion (study group,n= 20) or not (controls,n=10). Granulocyte functions were assessed using the nitro blue tetrazolium (NBT) reduction test and the staphylococcicidal index. Blood was drawn for granulocyte function tests once from controls and donors, and before, immediately after and 6 h after exchange transfusion in the study group. Mortality was 35% in the study group and 70% in controls. Gram‐negative organisms accounted for 80%, in the study group and 90% in controls. Mean total leukocyte count and neutrophil count increased significantly immediately after exchange transfusion and 6 h later. Absolute band count decreased significantly immediately after exchange transfusion and incrcased 6 h later. NBT reduction in septicemic neonates in the study group, as wclras in controls. was significantly decreascd as compared to donor cells. NBT reduction improved significantly immediately after exchange transfusion and 6 h later. The valucs of the perccntage of viable staphylococci recovered from neutrophils also improved significantly immediately after exchange transfusion and 6 h later. We conclude that exchange transfusion with fresh whole blood in severe neonatal septicemia with neutropenia improves survival, increases the neutrophil count and cnhances neutrophil functio