Extended spectrum beta-lactamase (ESBL) producing strains of Klebsiella pneumoniae have emerged as important nosocomial pathogens. The present report describes an outbreak of ESBL positive K. pneumoniae in a neonatal intensive care unit of a tertiary care center in southern India. The clinical and microbiological significance of multiresistant gram negative ESBL producers have been discussed in light of this outbreak by multi-resistant gram negative bacilli. The review also offers some practical guidance regarding infection control and therapeutic options.