Sulfamethoxazole (SMX) and trimethoprim (TMP) individually and a combination known as cotrimoxazole (SMX-TMP) are widely used for the treatment of protozoan and bacterial infections. SMX-TMP is also one of the widely used antibiotics administered orally in neonates, along with gentamicin injection, for treating pneumonia and sepsis by home-based healthcare providers in Asian countries. Although the use of this drug has successfully reduced neonate mortality, there is a concern for it causing neurotoxicity. Previous clinical studies with sulfisoxazole have demonstrated occurrence of kernicterus in neonates. This sulfonamide is thought to displace bilirubin from its albumin-binding sites in plasma leading to an elevation of plasma bilirubin, which crosses the blood-brain barrier, reaches central neurons to cause kernicterus. We performed an extensive review of clinical and animal studies with cotrimoxazole, which showed no reported incidences of kernicterus with SMX-TMP use in neonates. EndNote, BasicBiosis, Embase, PubMed and Toxline database searches were conducted using specific keywords yielding 74 full-length articles relevant to the review. This review has taken into account various factors, including the disease itself, direct effects of the drug and its metabolism through conjugation and acetylation through a thorough review of the literature to examine the potentials of SMX-TMP to cause kernicterus in neonates. SMX-TMP in oral doses administered to neonates for 7-10 days is unlikely to cause kernicterus. Also, this review recommends warranting the need of future studies using animal models and clinical studies in humans to address SMX-TMP toxicity.