A prospective study of growth and development during the first two years of life was performed on 71 preterm SGA infants. All infants were referred from outlying hospitals during 1974 and 1975. Most children continued to show growth retardation: 24 of 71 were less than third percentile for weight and height at two years. The potential for accelerated growth was largely limited to the first six months postterm with the degree and duration of catch-up growth unrelated to the degree of intrauterine growth retardation. Fifteen children (21%) had major neurologic sequelae; 30 children (42%) had Bayley scores ≤80. A developmental handicap (major neurologic defect or Bayley ≤80 or both) was present in 35 children (49%). Handicap was unrelated to the degree of IUGR or to the rate of postnatal head or linear growth. Handicap was strongly associated with a generalized depression of the CNS at the time of admission to the intensive care unit. This CNS depression was secondarily related to perinatal asphyxia and problems in postnatal stabilization prior to transfer. We stress the importance of early antenatal diagnosis of IUGR with appropriate antenatal fetal surveillance of affected babies and their subsequent delivery in a center equipped to give perinatal intensive care.