In this paper, stability of linear neutral systems with distributed delay is investigated. A bounded half circular region which includes all unstable characteristic roots, is obtained. Using the argument principle, stability criteria are derived which are necessary and sufficient conditions for asymptotic stability of the neutral systems. The stability criteria need only to evaluate the characteristic function on a straight segment on the imaginary axis and the argument on the boundary of a bounded half circular region. If there are no characteristic roots on the imaginary axis, the number of unstable characteristic roots can be obtained. The results of this paper extend those in the literature. Numerical examples are given to illustrate the presented results.