Abstract Background Paenibacillus thiaminolyticus may be an underdiagnosed cause of neonatal sepsis. Methods We prospectively enrolled a cohort of 800 full-term neonates presenting with a clinical diagnosis of sepsis at 2 Ugandan hospitals. Quantitative polymerase chain reaction specific to P. thiaminolyticus and to the Paenibacillus genus were performed on the blood and cerebrospinal fluid (CSF) of 631 neonates who had both specimen types available. Neonates with Paenibacillus genus or species detected in either specimen type were considered to potentially have paenibacilliosis, (37/631, 6%). We described antenatal, perinatal, and neonatal characteristics, presenting signs, and 12-month developmental outcomes for neonates with paenibacilliosis versus clinical sepsis due to other causes. Results Median age at presentation was 3 days (interquartile range 1, 7). Fever (92%), irritability (84%), and clinical signs of seizures (51%) were common. Eleven (30%) had an adverse outcome: 5 (14%) neonates died during the first year of life; 5 of 32 (16%) survivors developed postinfectious hydrocephalus (PIH) and 1 (3%) additional survivor had neurodevelopmental impairment without hydrocephalus. Conclusions Paenibacillus species was identified in 6% of neonates with signs of sepsis who presented to 2 Ugandan referral hospitals; 70% were P. thiaminolyticus. Improved diagnostics for neonatal sepsis are urgently needed. Optimal antibiotic treatment for this infection is unknown but ampicillin and vancomycin will be ineffective in many cases. These results highlight the need to consider local pathogen prevalence and the possibility of unusual pathogens when determining antibiotic choice for neonatal sepsis.