During the last 5 years we have followed nonoperatively all neonates with unilateral hydronephrosis and suspected ureteropelvic junction obstruction, regardless of the degree of hydronephrosis, shape of the diuretic renogram washout curve or initial degree of functional impairment. Of 104 patients 7 (7%) ultimately required pyeloplasty for obstruction, which was defined as a greater than 10% reduction in differential glomerular filtration rate and/or progression of hydronephrosis. Pyeloplasty returned renal function to pre-deterioration levels in all kidneys. In 16 patients with profound hydronephrosis and initial differential renal function less than or equal to 40% all traditional diagnostic tests for assessing obstruction, including diuretic renography washout pattern, were inaccurate in diagnosing obstruction and predicting which kidney would deteriorate. In 15 of 16 poorly functioning hydronephrotic kidneys rapid improvement in absolute and per cent differential renal function was observed, and the level of initial differential renal function served as a useful guide for timing of further diagnostic studies. Unilateral neonatal hydronephrosis appears to be a relatively benign condition and the risk of developing renal obstruction appears relatively slight. Because of diagnostic inaccuracy, the low risk of developing obstructive injury and the fact that many newborn kidneys with hydronephrosis rapidly improve function and dilation, it appears safe to follow neonatal unilateral hydronephrosis closely and nonoperatively.