The cost effectiveness of the use of disposable diapers was compared to that of cloth diapers in a neonatal unit of 65 beds. A total of 39 doctors and nurses participated in the study. It was found that a cost of RM4 .56 was incurred per baby per day when diapered with disposable diapers compared to RM4.29 when diapered with cloth diapers. However, all doctors and nurses preferred the disposable diaper system because of its significantly better qualities in providing hygiene and dryness, preventing leakage and contamination, and reducing the risk of diaper rashes. Disposable diapers were also easier to use and the volume of associated linen for laundering was reduced. The apparent RM0.27 extra cost per baby per day in the disposable diapering system is offset by its superior qualities and money saved in uncosted items like depreciation of laundering machines and nursing time saved. The disposable diapering system is therefore considered more cost-effective than the cloth diapers system.