Omphalitis contributes to neonatal morbidity and mortality in developing countries. Umbilical cord cleansing with antiseptics might reduce infection and mortality risk, but has not been rigorously investigated. In our community-based, cluster-randomised trial, 413 communities in Sarlahi, Nepal, were randomly assigned to one of three cord-care regimens. 4934 infants were assigned to 4.0% chlorhexidine, 5107 to cleansing with soap and water, and 5082 to dry cord care. In intervention clusters, the newborn cord was cleansed in the home on days 1-4, 6, 8, and 10. In all clusters, the cord was examined for signs of infection (pus, redness, or swelling) on these visits and in follow-up visits on days 12, 14, 21, and 28. Incidence of omphalitis was defined under three sign-based algorithms, with increasing severity. Infant vital status was recorded for 28 completed days. The primary outcomes were incidence of neonatal omphalitis and neonatal mortality. Analysis was by intention-to-treat. This trial is registered with , number NCT00109616. Frequency of omphalitis by all three definitions was reduced significantly in the chlorhexidine group. Severe omphalitis in chlorhexidine clusters was reduced by 75% (incidence rate ratio 0.25, 95% CI 0.12-0.53; 13 infections/4839 neonatal periods) compared with dry cord-care clusters (52/4930). Neonatal mortality was 24% lower in the chlorhexidine group (relative risk 0.76 [95% CI 0.55-1.04]) than in the dry cord care group. In infants enrolled within the first 24 h, mortality was significantly reduced by 34% in the chlorhexidine group (0.66 [0.46-0.95]). Soap and water did not reduce infection or mortality risk. Recommendations for dry cord care should be reconsidered on the basis of these findings that early antisepsis with chlorhexidine of the umbilical cord reduces local cord infections and overall neonatal mortality.