Introduction: The Oxygen Saturation Index (OSI) has emerged as a non-invasive monitoring alternative to the traditional Oxygenation Index (OI) in neonates with respiratory diseases requiring mechanical ventilation. This study aims to evaluate the utility of OSI over OI, given the critical need for improved monitoring strategies in neonatal intensive care units (NICUs). Methods: A prospective observational study was conducted in the NICU, Department of Paediatrics, from August 2022 to February 2024. Fifty neonates diagnosed with various respiratory diseases requiring mechanical ventilation were included. OSI and OI were calculated using non-invasive and invasive parameters, respectively. The correlation between OI and OSI was assessed using Pearson’s correlation coefficient, and a regression model was developed to predict OI from OSI measurements. Results: The study found a moderate positive correlation (r = 0.491, p < .001) between OI and OSI, with the correlation strengthening within the oxygen saturation range of 85%–95%. A linear regression model (OSI = 0.391*OI + 4.2341) was developed, facilitating the estimation of OI from OSI measurements. This model underscores the potential utility of OSI in neonatal respiratory monitoring. Conclusion: OSI presents as a viable, non-invasive alternative to OI for monitoring neonates with respiratory failure. The significant correlation and the development of a predictive regression model highlight OSI’s potential to improve clinical monitoring and decision-making in NICUs, potentially reducing the need for invasive procedures.