Sepsis is a leading cause of neonatal deaths across the world. Gram-negative rods such as Klebsiella and E. coli are major cause of sepsis in neonates. With a mortality rate of 1-4 deaths per thousand live births, sepsis is the second most important cause of neonatal deaths in the developing countries. The present study was designed to determine the occurrence of Gram-negative bacteria in neonatal sepsis and to find antibiotic susceptibility of isolated microbes. Blood samples of 100 neonates (1-89 days old) were sub cultured on MacConkey's and Blood agar for isolation of Gram-negative bacteria. A total of four bacterial species were isolated including Klebsiella (35.71%), E. coli (28.57%), Acinetobacter (21.42%) and Proteus (14.28%). Gram-negative bacteria were isolated more commonly from EOS (early onset sepsis) as compared to LOS (late onset sepsis). Klebsiella isolates from neonates showed sensitivity to imipenem (70%) followed by ceftazidime (40%) and cefotaxime (40%) and high resistance was shown by sulfamethoxazole (80%) and amikacin (70%). E. coli associated with neonatal sepsis were sensitive to imipenem (63%) while highly resistant to cefotaxime (75%) and ciprofloxacin (62%). For Acinetobacter high sensitivity was found for ceftazidime (50%) and resistance was shown to ciprofloxacin and sulfamethoxazole (100%). Proteus showed high sensitivity to amikacin (75%) and high resistance to imipenem and ciprofloxacin (75%). In conclusion, Gram-negative associated neonatal sepsis was found in the studied subjects and drug resistance was observed to clinically used antibiotics.