Hypotonia in neonates is a relatively common symptom, and has a broad differential diagnosis. Despite advances in diagnostic techniques over the past few years, understanding where hypotonia in a neonate originates remains a challenge. Hypotonia can be a result of diseases of the central or peripheral nervous system; differentiation between a central or a peripheral origin is helpful as a first step in the diagnostic evaluation. This article describes a systematic approach to clinical evaluation of a neonate with hypotonia, resulting in an adequate selection of specific diagnostic tests to establish the diagnosis.