Background-Every year an estimated 7.9 million babies are born with birth defects. Of these, more than 3 million die and a further 3.2 million suffer from a disability. In order to address this, countries require data to enable better resource allocation for prevention, management and rehabilitation of babies born with birth defects. This paper contributes to this evidence base, assessing the prevalence of birth defects, associated risk factors and health consequences in Nepal. Method-This is a prospective observational study conducted in 12 hospitals in Nepal for 18 months. All the women who delivered in the hospitals during the study period were enrolled. Independent researchers collected social and demographic data using semi-structured questionnaires at the time of discharge. Clinical events and birth outcome information were extracted from clinical case notes. Data were analysed to determine the prevalence and type of birth defect. Logistic regression was performed to assess risk factors and health outcomes of babies born with a birth defect. Results-Among the total 87,242 livebirths, the prevalence of birth defects was found to be 5.8 per 1000 live births. The most common birth defects observed were anencephaly (3.95%), cleft lip (2.77%), cleft lip and palate (6.13%), clubfeet (3.95%), eye abnormalities (3.95%) and meningomyelocele (3.36%). The odds of having a baby with a birth defect was higher for mothers younger than 20 years (adjusted Odds ratio (aOR) 1.64; 95% CI, 1.18-2.28) and those from disadvantaged ethnicity (aOR 1.78; 95% CI, 1.46-2.18). The odds of birth asphyxia was almost double for babies with birth defect (aOR 1.88; 95% CI, 1.41-2.51) when compared to babies without a birth defect. The odds of neonatal infection was nearly double for babies with birth defect (aOR 1.82; 95% CI, 1.12-2.96) compared to babies without a defect. Babies with a birth defect had three-fold risk of pre-discharge mortality (aOR 3.00; 95% CI, 1.93-4.69). Conclusion- Babies with birth defect have a higher risk of birth asphyxia, neonatal infection and pre-discharge mortality at birth. A portion of birth defect could have been prevented through micro-nutrient supplementation, a portion can be managed through surgery and rehabilitation. Funding-Swedish Research Council (VR)