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Infection accounts for the majority of pediatric mortality and morbidity in developing countries, but there are limited data on the infectious diseases burden in children from developed countries. We investigated reasons for hospitalization before age 2 years in a birth cohort of Western Australian Aboriginal and non-Aboriginal children.Data on live births between January 1990 and December 2000, and corresponding deaths and hospitalizations in the first 2 years of life, were obtained through linked population-based data.Almost half the cohort of 270,068 children were hospitalized at least once. Aboriginal children had significantly higher admission rates (2196 vs. 779 per 1000 live births), stayed longer and were more likely to die in hospital than non-Aboriginal children. Infections (mainly respiratory and gastrointestinal) were the most common reason for hospitalization, accounting for 34% of all admissions, with higher rates in Aboriginal (1114 per 1000 live births) than non-Aboriginal children (242 per 1000) (P < 0.001). Over time, admission rates for infections declined in Aboriginal children but increased in non-Aboriginal children. Aboriginal children were admitted 14 times more often for pneumonia than non-Aboriginal children.Infections are the leading cause of hospitalization in children under 2 years of age. The continuing heavy burden of serious infections, borne disproportionately by Aboriginal children, needs to be alleviated. Public health interventions such as the development and universal implementation of vaccines for respiratory syncytial virus, rotavirus and influenza are needed, while adequate funding must be committed to Indigenous health services and training.