Nepal introduced free delivery services for births in public facilities in 2005 in 25 districts with the intervention initially restricted to women with less than two living children and/or women with obstetric complications. After November 2007, eligibility conditions were relaxed to include all women, and the programme was later expanded to cover an additional 50 districts in December 2008. We exploit the phased expansion of the free birth delivery programme to identify its impact on place of delivery, the presence of skilled birth attendants (SBAs) and neonatal mortality using difference-in-difference methods, on data for 4457 live-births reported between 2001 and 2008 from Nepal Demographic and Health Surveys for 2006 and 2011. Programme impacts were estimated for: (1) initial implementation until the relaxation of eligibility criteria to include all women in November 2007 (early phase); and (2) initial implementation until the programme was expanded nationwide in December 2008 (longer phase). Early implementing districts were treatment districts, while late implementing hill districts were control districts. In the early phase, the likelihood of delivery by SBAs was 5.6 percentage points higher (95%CI 0.002, 0.111) and the likelihood of delivery in a public facility was 5.1 percentage points higher (95%CI -0.003, 0.106) in treatment districts compared with control districts. The programme lowered the likelihood of neonatal mortality by 4.0 (-0.072, -0.009) percentage points for women with less than two living children and by 6.9 percentage points (95%CI -0.104, -0.035) for women from lower castes and indigenous groups in treatment districts compared with women in control districts, during the early phase. Programme effects on use of public facilities for births and deliveries attended by SBAs were not sustained over a longer exposure period. The results on neonatal mortality persisted with longer programme exposure, although the effects were smaller in magnitude.