Extensive drug resistance in Klebsiella pneumoniae (K. pneumoniae) causing major outbreaks in large hospitals is an emerging challenge. We describe a near fatal outbreak of colistin resistant, carbapenem resistant K. pneumoniae (CRKp) producing metallo beta-lactamases (bla ) and bla in the neonatal intensive care unit (NICU) at the background of a larger outbreak involving multiple parts of the hospital and the challenges in its containment. Following identification of an outbreak due to colistin resistant CRKp between April to June 2017 in the NICU, a thorough surveillance of similar cases and the hospital environment was performed to trace the source. All the isolated K. pneumoniae were tested for susceptibility to standard antibiotics by disc diffusion and microbroth dilution methods. Molecular detection of extended spectrum beta lactamases (ESBLs) and carbapenemases (classes A, B, D) genes was done. Enterobacterial repetitive intergenic consensus (ERIC) PCR and multi-locus sequence typing (MLST) was done to determine the genetic relatedness of the isolates. Characteristics of different sequence types were statistically compared (Student's t-test). A total of 45 K. pneumoniae isolates were studied from NICU (14 cases of neonatal sepsis), ICU (18 cases), other wards (7 cases) along with 6 isolates from hospital environment and human colonizers. The primary case was identified in the ICU. All the K. pneumoniae from NICU and 94.4% from the ICU were colistin resistant CRKp. Majority (59.37% and 56.25%) harbored bla /bla and bla genes, respectively. Two distinct sequence types ST5235 and ST5313 were noted with colistin resistance, distribution within the NICU and mortality as significant attributes of ST5235 (p < 0.05). The outbreak was contained with strengthening of the infection control practices and unintended short duration closure of the hospital. Large hospital outbreaks with considerable mortality can be caused by non-dominant clones of colistin resistant CRKp harboring bla and bla carbapenemases in endemic regions. The exact global impact of these sequence types should be further studied to prevent future fatal outbreaks.