Kernicterus is a serious neurological complication that occurs when unconjugated bilirubin crosses the immature blood-brain barrier in neonates. This leads to bilirubin-induced brain toxicity, primarily affecting the basal ganglia and brainstem nuclei. If untreated, severe jaundice can cause irreversible damage, resulting in movement disorders, hearing loss, and cognitive impairment. Early recognition and treatment of hyperbilirubinemia are essential to prevent this condition. Hence, kernicterus is the most critical complication of untreated neonatal jaundice.

Reference: Nelson Textbook of Pediatrics, Robert M. Kliegman et al., 21st Edition.