OBJECTIVE: To determine the incidence of methicillin resistant and methicillin sensitive Staphylococcus aureus (MRSA and MSSA) bacteraemia in inpatients and associated mortality within 30 days after diagnosis. DESIGN: Anonymised record linkage study of data from hospital information systems and microbiology databases. SETTING: Teaching hospital and district general hospital in Oxfordshire. PARTICIPANTS: Inpatients aged 18 or over admitted to a teaching hospital between 1 April 1997 and 31 March 2004 and to a district general hospital between 1 April 1999 and 31 March 2004. The main part of the study comprised 216 644 inpatients; patients admitted to haematology, nephrology, or oncology services were not included because most were managed as outpatients. OUTCOME MEASURES: Nosocomial MSSA and MRSA bacteraemia; death in hospital within 30 days after bacteraemia. RESULTS: Rates of S aureus bacteraemia rose between 1997 and 2003, and MRSA was responsible for this increase. Overall mortality 30 days after bacteraemia was 29%. The crude odds ratio for death after MRSA bacteraemia compared with MSSA bacteraemia was 1.49 (95% confidence interval 0.99 to 2.26). CONCLUSION: The spread of MRSA has greatly increased the overall number of cases of S aureus bacteraemia and has contributed to short term mortality after S aureus bacteraemia.