Objectives To assess the association between neonatal BCG vaccination and mortality between 28 days and 3 years of age among tuberculosis (TB)-exposed and TB-unexposed children. Design Prospective cohort study. Setting Bandim Health Project runs an urban Health and Demographic Surveillance site in Guinea-Bissau with registration of mortality, vaccination status and TB cases. Participants Children entered the analysis when their vaccination card was inspected after 28 days of age and remained under surveillance to 3 years of age. Children residing in the same house as a TB case were classified as TB-exposed from 3 months prior to case registration to the end of follow-up. Methods Using Cox-proportional hazards models with age as underlying time scale, we compared mortality of children with and without neonatal BCG between October 2003 and September 2017. Main outcome measure HR for neonatal BCG compared with no neonatal BCG by TB-exposure status. Results Among the 39 421 children who entered the analyses, 3022 (8%) had observation time as TB-exposed. In total, 84% of children received neonatal BCG. Children with neonatal BCG had lower mortality both in TB-exposed (adjusted HR: 0.57 (0.26 to 1.27)) and in TB-unexposed children (HR: 0.57 (95% CI 0.47 to 0.69)) than children without neonatal BCG. Children exposed to TB had higher mortality than TB-unexposed children if they had not received neonatal BCG. Conclusion Neonatal BCG vaccination was associated with lower mortality among both TB-exposed and TB-unexposed children, consistent with neonatal BCG vaccination having beneficial non-specific effects. Interventions to increase timely BCG vaccination are urgently warranted.