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The paper presents the metabolism of bilirubin and consequences of its toxic effect on new-born’s brain. Increased production or decreased excretion of bilirubin, or a combina­tion of both, may be the cause of neonatal jaun­dice. After passing across the blood-brain barrier, bilirubin is deposited in some regions of the brain. Unconjugated and unbound bilirubin is toxic, and is especially harmful to the brain of a new-borns. The mechanism of its toxicity is not yet understood, but it is well known that biliru­bin can affect enzymes and cell membranes. The clinical picture of bilirubin encephalopathy has three phases. Late sequelae are often mani­fested as cerebral palsy, deafness and mental retardation. The paper gives several recom­mendations for the management of severe jaun­dice and prevention of bilirubin encephalopathy.