Extended-spectrum β-lactamase (ESBL)-producing Gram-negative bacilli (GNB) are of increasing clinical concern in all age groups worldwide. Whilst sepsis continues to be the leading cause of morbidity and mortality in Indian neonates in the community, identification of microbiological attributes in this population is lacking. This population-based study enrolled 1738 infants with a diagnosis of clinical sepsis at four participating centres in India. Each study site conducted Bactec blood culture, identified bacterial species by API test and stored isolates at -70 °C. From 252 GNB isolates, 155 (113 Klebsiella species, 21 Escherichia coli and 21 other) were subjected to drug susceptibility testing, ESBL phenotyping and testing for clonal relatedness of ESBL strains by PFGE. The results demonstrated that Klebsiella species and E. coli are the most common GNB causes of neonatal sepsis in India, and over one-third are ESBL producers in both community and hospital settings. ESBL-producing strains exhibited frequent co-resistance to aminoglycosides and ciprofloxacin, but remained susceptible to imipenem. PFGE analysis revealed extensive genetic diversity within the ESBL-producing isolates, showing multiple profiles (total of 23). Over 40% of all ESBL-producing isolates formed three pulsed-field profiles (PFP I-III), with PFP-II being the largest cluster (>20% of all ESBL-producing isolates), sharing strains from two distant locations. Identification of a common clone at two geographically distant centres indicated that predominant clones with increased virulence may exist, even in the absence of any clear outbreak. The presence of ESBL-producing strains in community infants with no prior history of hospitalization or antibiotic use dictates heightened vigilance and further studies on the ecology of these organisms.