To assess health care providers' identification of human immunodeficiency virus (HIV)-exposed infants, to ascertain the prevalence of transplacental or oral zidovudine treatment among infants exposed to HIV, and to estimate the impact of zidovudine use on perinatal transmission in rural and urban North Carolina. Survey of North Carolina newborns tested for HIV infection in 1993 and 1994 compared with the number of anonymous HIV-positive childbearing women. North Carolina hospitals, public health clinics, and private physicians' offices. Rates of identification of HIV-exposed infants and of perinatal HIV-1 transmission, determined by HIV culture and polymerase chain reaction testing in the infants. The proportion of HIV-exposed children in North Carolina who were identified and tested increased from 60% in 1993 to 82% for all of 1994, and to more than 90% for the last quarter of 1994. The HIV-exposed infants born in rural counties were more likely to be recognized than those born in urban counties (P<.001). In 1994, most infants were evaluated relatively early in life: 39% by 1 week of age, 63% by 6 weeks, and 76% by 3 months. Among infants with recognized HIV exposure, transmission decreased significantly between 1993 and 1994, from 21% to 8.5%, respectively (P=.009). After the announcement of the results of the AIDS Clinical Trials Group Protocol 076, zidovudine was given to 75% of HIV-positive women who delivered infants in North Carolina. Only 5.7% of infants who received any zidovudine became infected, compared with 18.9% of infants who received no zidovudine (P=.007). Health care providers in North Carolina are identifying most of the state's HIV-seropositive pregnant women, treating them with zidovudine, and testing their infants soon after birth for HIV infection. The use of zidovudine in pregnant women and their infants has reduced perinatal HIV transmission in the state.