Early differentiation of biliary atresia (BA) from idiopathic neonatal hepatitis (INH) is of important as outcome of Kasai portoenterostomy is directly related to the age of surgery. We need to have a simple and cheap biochemical test in resource poor countries like Bangladesh, to pick up BA early. Serum gamma glutamyl transpeptidase (GGT) has been shown to be a useful marker to differentiate BA from INH. Objective of the study was to find out the diagnostic value of gamma glutamyl transpeptidase (GGT) in differentiating Biliary atresia (BA) from idiopathic neonatal hepatitis (INH). This observational cross section study was carried out at the Department of Pediatric Gastroenterology and Nutrition, Bangabandhu Sheikh Mujib Medical University (BSMMU), Dhaka, Bangladesh. Study period was from January 2014 to June 2015. Consecutive infants with neonatal cholestasis (defined as conjugated bilirubin >1.0mg/dL when total bilirubin was ≤5.0 or >20.0% to total bilirubin) were included in this study. Clinical details and the results of laboratory tests were recorded in a proforma. BA was diagnosed on the basis of liver biopsy. Different biochemical parameters especially the results of serum GGT level (normal up to 60U/L), were compared between two groups (BA and INH). Receiver Operator Characteristic (ROC) curve for GGT was constructed to find out the best cut off value to discriminate BA from INH by using SPSS (version 20.0). After confirming cholestasis, a total of 165 cases were enrolled for study. Among them 86 cases were diagnosed as INH or BA. Among these 86 cases, 38(44.2%) cases were BA and 48(55.8%) cases were INH. On comparing 38(44.2%) cases of BA with 48(55.8%) cases of INH it was found that low birth weight (13.0% vs. 31.0%, p<0.05), persistently acholic stools (76.0% vs. 44.0%, p=0.002) and mean GGT values (921 vs. 264, p<0.001) were significantly different between them. At a cut off value of 524U/L (8.7 times upper limit of normal) the area under curve (AUC) for GGT was 0.81 with sensitivity, specificity, positive predictive value (PPV), negative predictive value (NPV) and accuracy were 81.7%, 72.9%, 70.5%, 83.3% and 76.1% respectively for the diagnosis of Biliary atresia. Serum GGT value of >524 U/L or 8.7 times upper limit of normal value was fairly good in differentiating BA from INH and can be used as a screening investigation in developing countries.