Objective: Routine varicella zoster vaccination for children aged 18 months began in Australia from. November 2005. The aim of this study was to compare the current incidence and outcomes of congenital and neonatal varicella in Australia with similarly collected data from 1995 to 1997. Methods: Active national prospective surveillance was carried out for congenital and neonatal varicella using the Australian Paediatric Surveillance Unit (APSU) for 3.5 years from June 2006. Around 1300 clinicians reported monthly according to predefined case criteria. Results: During the study period the mean monthly return rate of APSU report cards was 93.7%. Two cases of congenital varicella (0.19 per 100 000 live births per annum) and 16 cases of neonatal varicella (2.0 per 100 000 live births per annum) were identified. During 2008 and 2009 no cases of congenital varicella were reported; neonatal varicella rates declined to 0.7 per 100 000 live births per annum, a significant trend (p=0.005) and a reduction of over 85% compared with rates during 1995-1997 (the prevaccination era) and the first year of the current surveillance study. Eleven of 16 neonatal cases followed prenatal maternal infection; seven of the 11 infections were acquired from children, four of whom were living in the same household. Ten (62.5%) infants with neonatal varicella were admitted to hospital, one of whom developed varicella pneumonitis requiring ventilatory support, but none died. Only one infecting contact had been vaccinated. Conclusions: There has been an apparent reduction of congenital varicella and a significant reduction of neonatal varicella in Australia following the introduction of universal varicella vaccination in 2005.