Information on the average and incremental costs of implementing alternative strategies for treating young infants 0-59 days old in primary health facilities with signs of possible serious bacterial infection (PSBI) when a referral is not feasible is limited but valuable for policymakers. Direct activity costs were calculated for outpatient treatment of PSBI and pneumonia in two districts of India: Palwal, Haryana and Lucknow, Uttar Pradesh. These included costs of staff time and consumables for initial assessment, classification, and referrals; recommended treatment of fast breathing (oral amoxicillin for seven days) and PSBI (injection gentamicin and oral amoxicillin for seven days); and daily assessments. Indirect operational costs included staff training; staff time cost for general management, supervision, and coordination; referral transport; and communication. The average cost per young infant treated for recommended and acceptable treatment for PSBI was 16 US dollars (US$) (95% CI = US$15.4-16.3) in 2018-19 and US$18.5 in 2022 (adjusted for inflation) when all direct and indirect operational costs were considered. The average cost of recommended treatment for pneumonia was US$10.1 (95% CI = US$9.7-10.6) or US$11.7 in 2022, per treated young infant. The incremental cost 2018-2019 for supplies, medicines, and operations (excluding staff time costs) per infant treated for PSBI was US$6.1 and US$4.3 and for pneumonia was US$3.5 and US$2.2 in Palwal and Lucknow, respectively. Operation and administrative costs were 25% in Palwal and 12% in Lucknow of the total PSBI treatment costs. The average cost per live birth for treating PSBI in each population was US$5 in Palwal and US$3 in Lucknow. Higher operation costs for social mobilisation activities in Palwal led to the empowerment of families and timely care-seeking. Costs of treatment of PSBI with the recommended regimen in an outpatient setting, when a referral is not feasible, are under US$20 per treated child and must be budgeted to reduce deaths from neonatal sepsis. The investment must be made in activities that lead to successful identification, prompt care seeking, timely initiation of treatment and follow-up.