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Objectives In low-income settings, neonatal mortality rates (NMR) are higher among socioeconomically disadvantaged groups. Institutional deliveries have been shown to be protective against neonatal mortality. In Gujarat, India, the access of disadvantaged women to institutional deliveries has increased. However, the impact of increased institutional delivery on NMR has not been studied here. This paper examined if institutional childbirth is associated with lower NMR among disadvantaged women in Gujarat, India. Methods A community-based prospective cohort of pregnant women was followed in three districts in Gujarat, India (July 2013-November 2014). Two thousand nine hundred and nineteen live births to disadvantaged women (tribal or below poverty line) were included in the study. Data was analyzed using multivariable logistic regression. Results The overall NMR was 25 deaths per 1000 live births. Multivariable analysis showed that institutional childbirth was protective against neonatal mortality only among disadvantaged women with obstetric complications during delivery. Among mothers with obstetric complications during delivery, those who gave birth in a private or public facility had significantly lower odds of having a neonatal death than women delivering at home (AOR 0.07 95% CI 0.01-0.45 and AOR 0.03, 95% CI 0.00-0.33 respectively). Conclusions for Practice Our findings highlight the crucial role of institutional delivery to prevent neonatal deaths among those born to disadvantaged women with complications during delivery in this setting. Efforts to improve disadvantaged women's access to good quality obstetric care must continue in order to further reduce the NMR in Gujarat, India.