A large outbreak caused by expanded-spectrum cephalosporin-resistant Klebsiella pneumoniae (ESCRKP) was observed in a neonatal intensive care unit (NICU) in central Italy. The outbreak involved 127 neonates (99 colonizations and 28 infections, with seven cases of sepsis and two deaths) over a period of more than 2 years (February 2008 to April 2010). Characterization of the 92 nonredundant isolates that were available for further investigation revealed that all of them except one produced the FOX-7 AmpC-type β-lactamase and belonged to either sequence type 14 (ST14) or ST26. All of the FOX-7-positive isolates were resistant to cefotaxime, ceftazidime, and piperacillin-tazobactam, while 76% were susceptible to cefepime, 98% to ertapenem, 99% to meropenem, and 100% to imipenem. The two carbapenem-nonsusceptible isolates had alterations in the genes encoding outer membrane proteins K35 and K36, which resulted in truncated and likely nonfunctional proteins. The outbreak was eventually controlled by the reinforcement of infection control measures based on a multitiered interventional approach. This is the first report of a large NICU outbreak caused by ESCRKP producing an AmpC-type enzyme. This study demonstrates that AmpC-type enzyme-producing strains can cause large outbreaks with significant morbidity and mortality effects (the mortality rate at 14 days was 28.5% for episodes of sepsis), and it underscores the role of laboratory-based surveillance and infection control measures to contain similar episodes.