ObjectivesTo investigate outbreaks of diarrhoeal illness in children attending long‐daycare centres (LDCs), to characterise parasitic, bacterial and viral isolates from the children's faeces and to identify individual and LDC risk factors for diarrhoea.DesignEleven‐month prospective case‐control study of diarrhoeal outbreaks among children in LDCs.Subjects2368 children attending 35 LDCs in the western Sydney area.Main outcome measures: Frequency of diarrhoeal outbreaks, rate of attack and spread to family members; pathogens isolated from stools; and individual and LDC risk factors.ResultsThe overall incidence of diarrhoeal disease was low (0.28 outbreaks per centre per year and 0.056 outbreak‐associated cases per child‐year). Attack rates during outbreaks varied widely (4%—55%; mean, 15%), as did secondary spread rates to family members (1%—15%; mean, 9%). Pathogens were isolated from 7% of symptomatic children and 7% of controls; no outbreak was shown to be caused by a recognised pathogen. Children with outbreak‐associated diarrhoeal illness were more likely to have suffered vomiting, poor appetite, lack of energy, fever and to have taken antibiotics in the previous week than other children. Hygiene practices varied widely among centres.ConclusionsWe found low incidence and morbidity from diarrhoeal illness in Australian urban LDCs. Diarrhoea in children in LDCs may be caused predominantly by non‐infectious factors such as diet and antibiotic exposure. Current hygiene measures in LDCs seem adequate to prevent and contain outbreaks of infectious diarrhoea.