Linear growth retardation during childhood is a determinant of short stature and impaired capacities in adults of developing countries. To study the effect of diarrhea on height during childhood, the authors followed a birth cohort of 224 Peruvian children for 35 months with records of daily diarrhea and monthly anthropometry. This study was conducted from April 1995 to December 1998. At 24 months of age, study children were 2.5 cm shorter than the US National Center for Health Statistics/World Health Organization growth reference. A diarrheal prevalence of 2.3% in the first 24 months of life explained 2-27% of this growth deficit. There was a 2-month delay before the effects of diarrhea on height became manifest. Height deficits were proportional to diarrheal prevalence. For example, children ill with diarrhea 10% of the time during the first 24 months were 1.5 cm shorter than children who never had diarrhea. In addition, the adverse effects of diarrhea on height varied by age. Diarrhea during the first 6 months of life resulted in long-term height deficits that were likely to be permanent. In contrast, diarrhea after 6 months of age showed transient effects. Study results indicate that diarrhea control, especially during the first 6 months of life, is likely to improve linear growth in Peruvian children.