Objective. The aim of this study was to establish whether abnormal signal intensity in the posterior limb of the internal capsule (PLIC) on magnetic resonance imaging is an accurate predictor of neurodevelopmental outcome at 1 year of age in infants with hypoxic-ischemic encephalopathy (HIE). Methods. We have examined 73 term neonates with HIE between 1 and 17 days after birth with cranial magnetic resonance imaging and related the magnetic resonance imaging findings to neurodevelopmental outcome at 1 year of age. Results. All infants with an abnormal signal intensity in the PLIC developed neurodevelopmental impairment although in 4 infants with very early scans the abnormal signal was not apparent until up to 4 days after birth. A normal signal intensity was associated with a normal outcome in all but 4 cases; 3 of these infants had minor impairments and all had persistent imaging changes within the white matter. The 4th infant with a normal signal intensity on day 2 died before a further image could be obtained. The absence of normal signal predicted abnormal outcome in term infants with HIE with a sensitivity of 0.90, a specificity of 1.0, a positive predictive value of 1.0, and a negative predictive value of 0.87. The test correctly predicted outcome in 93% of infants with grade II HIE, according to the Sarnat system. Applying a Bayesian approach, the predictive probability of the test (the probability that the test would predict an outcome correctly) was distributed with a mean of 0.94 and 95% confidence limits of 0.89 to 1.0. Conclusion. Abnormal signal intensity in the PLIC is an accurate predictor of neurodevelopmental outcome in term infants suffering HIE.