The aim of this prospective study was to determine the adverse effects of antiretroviral therapy in HIV-1 infected children and factors associated with adverse effects. The study was performed in a pediatric and perinatal HIV clinic in a tertiary general hospital. Forty-three HIV positive children from the age group of 5 months to 14 years were started on antiretroviral therapy (ART). Thirteen patients (30%) had adverse effects related to the ART. Seven patients (16%) had hepatotoxicity, 5 patients (12%) had raised serum amylase without symptomatic pancreatitis, 5 patients (12%) had zidovudine (AZT) induced anemia, 4 patients (9%) had Nevirapine (NVP) induced rash, 1 patient (2%) had Didanosine (ddI) induced pain in abdomen, 1 patient (2%) had Stavudine (d4T) induced angioedema, and 1 patient (2%) had hepatic steatosis. Five patients (71%) with hepatotoxicity responded to dose adjustment of ART whereas in 2 patients (29%), the elevated liver enzymes resolved on its own. Two patients (40%) with AZT induced anemia required omission of AZT and remaining 3 patients (60%) responded to dosage adjustment. ddI induced abdominal pain, d4T induced angioedema and hepatic steatosis resolved on omitting the respective antiretroviral drug. NVP induced rash and raised serum amylase subsided without any intervention. Hepatotoxicity was seen at higher viral load [Mean=118608 copies/ml] whereas elevated serum amylase was seen at lower viral load [mean=37631 copies/ml], which was statistically significant (p < 0.0001). NVP induced rash was seen in early weeks of therapy, serum amylase abnormalities were seen at a mean interval of 0.9 years after starting therapy, hepatotoxicity was seen at a mean interval of 1.7 years and AZT induced anemia was seen at a mean interval of 2.0 years after starting therapy. Adverse effects with antiretroviral drugs in HIV-infected children are quite common. Hepatotoxicity is the commonest adverse effect noted followed by elevated serum amylase and zidovudine induced anemia. Hepatotoxicity is seen at higher viral load as compared to other adverse effects. Most of the adverse effects are reversible on dosage modification or omitting the offending drug.