Abstract: Background: Sepsis is an overwhelming and life-threatening response to bacteria in bloodstream and a major cause of neonatal morbidity and mortality. Understanding the etiology and potential risk factors for neonatal sepsis is urgently required, particularly in low-income countries where burden of infection is high and its epidemiology is poorly understood. Methods: A prospective observational cohort study was conducted between April 2016 and October 2017 in a level three NICU at a tertiary care hospital in Nepal to determine the bacterial etiology and potential risk factors for neonatal sepsis. Results: Among 142 NICU admitted neonates, 15% (21/142) and 32% (46/142) developed blood culture-positive and -negative neonatal sepsis respectively. Klebsiella pneumoniae (34%, 15/44) and Enterobacter spp. (25%, 11/44) were the most common isolates. The antimicrobial resistance of isolates to ampicillin (100%, 43/43), cefotaxime (74%, 31/42) and ampicillin-sulbactam (55%, 21/38) were the highest. BlaTEM (53%, 18/34) and blaKPC (46%, 13/28) were the commonest ESBL and carbapenemase genes respectively. In univariate logistic regression, the odds of sepsis increased with each additional day of use of invasive procedures such as mechanical ventilation (OR 1.086, 95% CI 1.008–1.170), umbilical artery catheter (OR 1.375, 95% CI 1.049–1.803), intravenous cannula (OR 1.140, 95% CI 1.062–1.225); blood transfusion events (OR 3.084, 95% CI 1.407–6.760); NICU stay (OR 1.109, 95% CI 1.040–1.182) and failure to breast feed (OR 1.130, 95% CI 1.060–1.205). Sepsis odds also increased with leukopenia (OR 1.790, 95% CI 1.04–3.082), increase in C-reactive protein (OR 1.028, 95% CI 1.016–1.040) and decrease in platelets count (OR 0.992, 95% CI 0.989–0.994). In multivariate analysis, increase in IV cannula insertion days (OR 1.147, 95% CI 1.039–1.267) and CRP level (OR 1.028, 95% CI 1.008–1.049) increased the odds of sepsis. Conclusions: Our study indicated various nosocomial risk factors and underscored the need to improve local infection control measures so as to reduce the existing burden of sepsis. We have highlighted certain sepsis associated laboratory parameters along with identification of antimicrobial resistance genes, which can guide for early and better therapeutic management of sepsis. These findings could be extrapolated to other low-income settings within the region.