Objective.To assess the financial and clinical burden of diarrhea- and rotavirus-associated disease among a population of privately insured US children.Methods.For the period 1993 through 1996, we analyzed medical claims data from a large, administrative database containing information on ∼300 000 children <5 years of age to examine trends in, and costs associated, with hospitalizations and outpatient visits for diarrhea.Results.An annual average of 1186 diarrhea-associated hospitalizations (35 per 10 000 children <5 years) and 33 386 outpatient visits (943 per 10 000 children <5 years) were reported, accounting for 4% of all hospitalizations and 2% of all outpatient visits among children <5 years of age. Diarrhea-associated hospitalizations and outpatient visits showed a distinct winter-spring peak consistent with that of rotavirus infection. The excess of diarrhea-associated events occurring during the winter-spring peak accounted for an average of 50% of all diarrhea-associated hospitalizations and 18% of all diarrhea-associated outpatient visits. The median cost (in 1998 constant dollars) of a diarrhea-associated hospitalization was $2307, and that for a rotavirus-associated hospitalization was $2303. Median costs of diarrhea- and rotavirus-associated outpatient visits were $47 and $57, respectively.Conclusions.Diarrhea is an important cause of morbidity in this insured population of young children. The epidemiologic features of diarrhea-associated events suggest that rotavirus is an important contributor to the overall morbidity from diarrhea. These disease burden and cost estimates should provide useful information with which to assess the costs and benefits of future interventions for rotavirus-associated illness.