Background. Exchange transfusion (ET) for hyperbilirubinemia is associated with many complications. The complications are underreported as most of the published studies are retrospective, used varying definitions of adverse events (AEs) and variable follow-up periods. Aim: We evaluated the incidence of clinical, biochemical, hematological, and radiological AEs, including serious AEs, within 2 weeks of ET for hyperbilirubinemia in neonates, using standard definitions. Materials and Methods: This prospective observational study was conducted in level III newborn unit of north India from February 2008 to February 2009. We enrolled consecutive inborn and outborn neonates admitted with hyperbilirubinemia and required ET. Babies requiring partial exchange for anemia/polycythemia or ET for indications other than hyperbilirubinemia were excluded. They were prospectively monitored for clinical, biochemical, hematological, and radiological AEs up to 2 weeks following the procedure. We calculated the incidence/AE rate (AER) as the rate of events per 100 ET and compared them among various groups using the Chi-square test. The SPSS v20 was used for the analysis, and value of P < 0.05 was considered as statistically significant. Results: A total of 202 neonates were screened and 141 neonates (182 ET) were enrolled. The overall AER was 112/100 ETs. The most common AE was biochemical (45.6/100 ET), followed by hematological (44.5/100 ETs), clinical (15.9/100 ETs), and radiological (8.9/100 ETs). Severe AER was 12.6/100 ETs. The AER was significantly more in lower gestation and birth weight groups. Conclusion: ET is a high-risk procedure and should be performed only when the benefit of the procedure offsets the risks.