Objectives: We conducted a 4-year (1995-1998) field study in a Peruvian peri-urban community (pueblo joven) to examine the relation between diarrhea and nutritional status in 230 children <3 years of age. Methods: We followed the birth cohort daily for diarrhea and monthly for anthropometry. We modeled diarrheal incidence with a multivariate time-to-event regression model to account for multiple episodes per child and irregular follow-up periods and diarrheal duration with a mixed-effects gamma regression model to account for disease heterogeneity across children. Results: During 159,551 child-days of follow-up, we identified 1387 diarrheal episodes, which yielded an average incidence of 3.2 episodes per child-year. Diarrhea was seasonal, for example, infants had up to 8 diarrheal episodes during the summer; however, these variations decreased noticeably with age. Nutritional status was significantly associated with diarrheal incidence. The frequency of diarrhea increased by 15% per standard deviation decrease in height-for-age z score. Diarrheal episodes in children <6 months of age lasted significantly longer than episodes among older children. Conclusions: These results identify infants and children of poor nutritional status as priority risk groups for prevention efforts aimed at reducing the burden of acute childhood diarrhea.