Promoting ‘care closer to home’ for ill children is a policy and practice objective internationally. Progress towards this goal is hampered by a perceived lack of evidence on effectiveness and costs. The aim of the work reported here was to establish the strength of current international evidence on the effectiveness and costs of paediatric home care by updating and extending an earlier systematic review. A systematic review following Centre for Reviews and Dissemination guidelines involved updating electronic searches, and extending them to cover paediatric home care for short-term acute conditions. Twenty-one databases were searched from 1990 to April 2007. Hand searching was also carried out. Pairs of team members, guided by an algorithm, selected randomized controlled trials (RCTs), other comparative studies and studies including health economics data. A third reviewer resolved any disagreements. The quality of RCTs was assessed, but a ‘best-evidence’ approach was taken overall. Data were extracted into specifically designed spreadsheets and a second team member checked all data. Narrative synthesis was used throughout. This paper reports findings from RCTs and studies with health economics data. In total, 16 570 publications were identified after de-duplication. Eleven new RCTs (reported in 17 papers) and 20 papers with health economics data were included and reviewed. Evidence on costs and effectiveness of paediatric home care has not grown substantially since the previous review, but this updated review adds weight to the conclusion that it can deliver equivalent clinical outcomes for children and not impose a greater burden on families. Indeed, in some cases, there is evidence of reduced burden and costs for families compared with hospital care. There is also growing evidence, albeit based on weaker evidence, that paediatric home care may reduce costs for health services, particularly for children with complex and long-term needs.