A number of previous studies have found that prenatal participation in the Special Supplemental Food Program for Women, Infants, and Children (WIC) improves birth outcomes, but only a few studies have provided cost-benefit analyses. The present study linked Medicaid and WIC data files to birth certificates for live births in North Carolina in 1988. Women who received Medicaid benefits and prenatal WIC services had substantially lower rates of low and very low birth weight than did women who received Medicaid but not prenatal WIC. Among white women, the rate of low birth weight was 22% lower for WIC participants and the rate of very low birth weight was 44% lower; among black women, these rates were 31% and 57% lower, respectively, for the WIC participants. Multivariate logistic regression analysis confirmed that prenatal participation in a WIC program reduced the rate of low birth weight. It was estimated that for each $1.00 spent on WIC services, Medicaid savings in costs for newborn medical care were $2.91. A higher level of WIC participation was associated with better birth outcomes and lower costs. These results indicate that prenatal WIC participation can effectively reduce low birth weight and newborn medical care costs among infants born to women in poverty.