Background: Birth asphyxia remains a major cause of neonatal morbidity and mortality, particularly in developing countries. Early identification of the extent of hypoxic injury is crucial for timely intervention. Serum Lactate Dehydrogenase (LDH), a marker of tissue damage, has been proposed as a potential indicator of perinatal asphyxia severity. Aim: To assess serum LDH levels in term neonates with birth asphyxia and evaluate its correlation with the severity of hypoxic-ischemic encephalopathy (HIE). Material and Methods: This prospective observational study was conducted over 12 months in the Department of Paediatrics at a tertiary care teaching hospital. A total of 110 term neonates were enrolled and divided into two groups: Group A (55 neonates with birth asphyxia) and Group B (55 healthy term neonates as controls). Serum LDH levels were measured within 6 hours of birth using an enzymatic UV-kinetic method. Clinical data including mode of delivery, Apgar scores, and HIE staging were recorded. Statistical analysis was performed using SPSS version 21.0, with significance set at p < 0.05. Results: Caesarean section was significantly more common in the asphyxiated group (60% vs. 38.18%, p = 0.049). Risk factors such as prolonged labour (32.73% vs. 5.45%), meconium-stained liquor (38.18% vs. 3.64%), and foetal distress (30.91% vs. 1.82%) were significantly associated with birth asphyxia (p < 0.001). Apgar scores were significantly lower in Group A at both 1 and 5 minutes (p < 0.001). Mean serum LDH levels were significantly higher in asphyxiated neonates (1126.35 ± 240.27 U/L) compared to controls (612.42 ± 156.54 U/L, p < 0.001). A progressive increase in LDH levels was noted with advancing HIE severity: Stage I (980.22 ± 115.43 U/L), Stage II (1132.85 ± 172.68 U/L), and Stage III (1346.73 ± 198.35 U/L, p < 0.001). Conclusion: Serum LDH levels are significantly elevated in neonates with birth asphyxia and show a strong correlation with HIE severity. LDH can serve as a valuable biochemical marker for early diagnosis and prognostication of perinatal asphyxia when used alongside clinical indicators.