Malassezia pachydermatis, a lipophilic yeast, has been described to cause sporadic nosocomial bloodstream infections (BSI). Nosocomial outbreaks of M. pachydermatis BSI have never been described. A cluster of M. pachydermatis BSIs in the neonatal intensive care unit at Louisiana State University Medical Center, University Hospital provided the opportunity to investigate the epidemiology of this organism and apply molecular epidemiologic typing techniques. A case-patient was defined as any neonatal intensive care unit patient in University Hospital with a blood culture positive for M. pachydermatis from January 1, 1989, through August 15, 1991. Five patients met the case definition. Case-patients were premature as estimated by gestational age and required prolonged hospitalization. Case-patients received parenteral nutrition and intravenous lipids for twice as many days as randomly selected controls. No environmental source of M. pachydermatis was identified; however, infants on each side of a previously identified M. pachydermatis-colonized infant became colonized with M. pachydermatis during a 20-day period. Chromosomal analysis of five M. pachydermatis blood isolates from two case-patients had identical banding patterns. These data show that M. pachydermatis can cause nosocomial BSI outbreaks, that premature infants receiving parenteral nutrition and/or lipids may be at greatest risk and that transmission is most likely from person to person, probably via the hands of medical personnel.