Background: Stillbirth is a profoundly distressing event. Little evidence exists to guide best practice bereavement care in the perinatal setting. Aims: To document parents' experiences and outcomes in relation to seeing and holding a stillborn baby at a hospital with a specialist perinatal bereavement service. Materials and Methods: Prospective cohort study of 26 mothers and 11 fathers who experienced a stillbirth at the Mater Mothers' Hospital, Brisbane from September 2007–December 2008. Mailed self-report questionnaires were completed at 6–8 weeks and 6 and 13 months postloss. Validated measures assessed regret regarding the decision to see and hold the baby, parental grief and mental health. Results: Of 78 fetal deaths, 26 mothers and 11 fathers participated. Most (20 mothers; 9 fathers) chose to see and hold their stillborn infant. Little regret was reported, irrespective of the decision. For mothers, seeing and holding was associated with higher ‘active grief’ at 6–8 weeks (mean difference (MD) = 10.5; 95% CI = 3.3–17.8; P < 0.01), 6 months (MD = 8.0; 95% CI = 0.6–15.4; P = 0.03) and 13 months (MD = 9.9; 95% CI = 1.8–17.9; P = 0.01), but not with ‘not coping’ or ‘despair’, or mental health. Fathers reported poorer mental health but small numbers mean estimates are imprecise. Conclusions: More intense grief does not equate with poorer mental health for mothers who choose to see and hold a stillborn infant. Fathers' experiences warrant further study. Supported decision-making is important for bereaved parents, and rigorous evaluation of bereavement care is essential.