Background The aim of this study was to assess the sensibility of the hand in children with a neonatal brachial plexus palsy (NBPP) involving the C5 and C6, and to correlate results with dexterity. Methods Fifty children with NBPP (30 after nerve surgery, mean age 9.8 years) and 25 healthy controls (mean age 9.6 years) were investigated. Sensibility was assessed with two-point discrimination and Semmes-Weinstein monofilaments. Dexterity was evaluated with a single item from the Movement Assessment Battery for Children-2. We compared the affected side with the nondominant hand of the control group. Results The sensibility in the first and second fingers was significantly diminished in the NBPP for both two-point discrimination (P = 0.005 and P = 0.014, respectively) and monofilament test (P < 0.001). Dexterity was significantly lower in the NBPP group than in control group, corrected for age (P = 0.023). There was a significant difference toward decreasing hand function with decreasing sensibility according to the Semmes-Weinstein test for the thumb (Jonckheere–Terpstra nonparametric trend test, P = 0.036). Conclusions The sensibility of the thumb and index finger in children with an upper plexus lesion (either surgically or conservatively treated) is diminished. The decreased sensibility has a negative impact on hand function. Appreciation of diminished hand function in patients with NBPP involving C5 and C6 is important to optimize treatment.