Background Evidence shows that delivery of prompt and appropriate in-patient newborn care (IPNC) through health facility (HF)-based neonatal care and stabilization units (NCU/NSUs) reduce preventable newborn mortalities (NMs). This study investigated the HFs for availability and performance of NCU/NSUs in providing quality IPNC, and explored factors influencing the observed performance outcomes in Mtwara region, Tanzania. Methods A cross-sectional study was conducted using a follow-up explanatory mixed-methods approach. HF-based records and characteristics allowing for delivery of quality IPNC were reviewed first to establish the overall HF performance. The review findings were clarified by healthcare staff and managers through in-depth interviews (IDIs) and focus group discussions (FGDs). Results About 70.6% (12/17) of surveyed HFs had at least one NCU/NSU room dedicated for delivery of IPNC but none had a fully established NCUs/NSU, and 74.7% (3,600/4,819) of needy newborns were admitted/transferred in for management. Essential medicines such as tetracycline eye ointment were unavailable in 75% (3/4) of the district hospitals (DHs). A disparity existed between the availability and functioning of equipment including infant radiant warmers (92% vs 73%). Governance, support from implementing patterns (IPs), and access to healthcare commodities were identified from qualitative inquiries as factors influencing the establishment and running of NCUs/NSUs at the HFs in Mtwara region, Tanzania. Conclusion Despite the positive progress, the establishment and performance of NCUs/NSUs in providing quality IPNC in HFs in Mtwara region is lagging behind the Tanzania neonatal care guideline requirements, particularly after the IPs of newborn health interventions completed their terms in 2016. This study suggests additional improvement plans for Mtwara region and other comparable settings to optimize the provision of quality IPNC and lower avoidable NMs.