Doctors told Jenna Hannon, 24, her premature 1lb 12oz son Oliver was doing 'fantastically' in the neonatal intensive care unit at Bristol's Southmead Hospital.
Hours later she and husband Andrew were called to say the little boy's condition had deteriorated.
When they returned, the couple were told their son had died. Medics handed Oliver to Jenna after trying to save him with CPR.
Jenna, of Tidworth, Wilts, who has two older children, said: "We were told he was doing really well, then suddenly he went downhill.
"The doctors said there was nothing more they could do, so I just held him until he died in my arms. I'm heartbroken."
North Bristol NHS Trust said a pseudomonas infection contributed to the death in August. It was traced to the water system. Strict infection control measures have been put in place.
Jenna and soldier Andrew are suing the hospital, where another 12 babies tested positive for the bug. Nine were discharged, but three are still being treated.