Cerebral hypoxia is a major contributor to neonatal/infant mortality and morbidity including severe neurological complications such as mental retardation, cerebral palsy, motor impairment, and epilepsy. Currently, no technology is capable of accurate monitoring of neonatal cerebral oxygenation. We proposed to use optoacoustics for this application by probing the superior sagittal sinus (SSS), a large central cerebral vein. We developed and built a multi-wavelength, optical parametric oscillator (OPO) and laser diode optoacoustic systems for measurement of SSS blood oxygenation in the reflection mode through open anterior or posterior fontanelles and in the transmission mode through the skull in the occipital area. In this paper we present results of initial tests of the laser diode system for neonatal cerebral oxygenation measurements. First, the system was tested in phantoms simulating neonatal SSS. Then, using the data obtained in the phantoms, we optimized the system's hardware and software and tested it in neonates admitted in the Neonatal Intensive Care Unit. The laser diode system was capable of detecting SSS signals in the reflection mode through the open anterior and posterior fontanelles as well as in the transmission mode through the skull with high signal-to-noise ratio. Using the signals measured at different wavelengths and algorithms developed for oxygenation measurements, the laser diode system provided real-time, continuous oxygenation monitoring with high precision at all these locations.