Near-infrared spectra (0.95-2.4 mu m) of the peculiar Type IIn supernova 1998S in NGC 3877 from 95 to 355 days after maximum light are presented. K-band data taken at days 95 and 225 show the presence of the first overtone of CO emission near 2.3 mu m, which is gone by day 355. An apparent extended blue wing on the CO profile in the day 95 spectrum could indicate a large CO expansion velocity (approximate to 2000-3000 km s(-1)). This is the third detection of infrared CO emission in nearly as many Type II supernovae studied, implying that molecule formation may be fairly common in Type II events and that the early formation of molecules in SN 1987A may be typical rather than exceptional. Multipeak hydrogen and helium lines suggest that SN 1998S is interacting with a circumstellar disk, and the fading of the red side of this profile with time suggests that dust is forming in the ejecta, perhaps induced by CO cooling. Continuum emission that rises toward longer wavelengths (J --> K) is seen after day 225 with an estimated near-infrared luminosity greater than or similar to 10(40) ergs s(-1). This may be related to the near-infrared excesses seen in a number of other supernovae. If this continuum is due to free-free emission, it requires an exceptionally shallow density profile. On the other hand, the shape of the continuum is well fitted by a 1200 +/- 150 K blackbody spectrum, possibly due to thermal emission from dust. Interestingly, we observe a similar 1200 K blackbody-like, near-infrared continuum in SN 1997ab, another Type IIn supernova at an even later postmaximum epoch (day 1064+). A number of dust emission scenarios are discussed, and we conclude that the near-infrared dust continuum is likely powered by the interaction of SN 1998S with the circumstellar medium.
