Background: Respiratory distress syndrome (RDS) is a major cause of neonatal morbidity and mortality. It is a breathing disorder characterized by a deficiency or inactivity of surfactant in the lungs of preterm and term babies and if not treated, it leads to serious complications like pneumothorax, emphysema, bronchopulmonary dysplasia and death. Objective: To estimate the effect of surfactant therapy on oxygen requirement and neonatal mortality as well as the incidence of RDS in the special care neonatal unit (SCNU) in the AL Batool Teaching Hospital in Diyala Governorate. Patients and Methods: A sample of 2000 patients with signs and symptoms of RDS at the time of presentation was prospectively collected from the 1st of July 2022 until the 1st of March 2023 in SCNU at Al-Batool Teaching Hospital. Gestational age, body weight, the use of oxygen, surfactant therapy, and continuous positive airway pressure (CPAP) were taken into consideration in assessing the outcome of RDS neonates. Results: There was a significant relationship between surfactant administrations, the period of staying on CPAP, and oxygen demand as the p-value was < 0.001 for both. Neonates who received surfactant had a lower mortality rate, with an incidence of 2.5%; the p-value was < 0.001. Incidence of neonatal RDS was 694 (34.7%). Conclusion: Since the incidence of RDS was 34.7%, surfactant therapy should be routine in neonatal special and intensive care units. Proper use of surfactant (proper timing and mode of administration) reduces oxygen demand, the need for CPAP, hospitalization, and mortality among those neonates.