The paucity of data on the haematological profile of Ethiopian children prompted this survey. In October and November, 1987, a survey of haematocrit levels utilizing capillary blood and morphological studies on blood films by means of the Wright stain was conducted in the peri-urban community of Koladiba in Northwestern Ethiopia. All but 21 children (0.5-6 years) in the community participated. The mean and median haematocrit levels in children 0.5-6 years was 38% each with a range of 26-52%. Lowest haematocrit was found between 1-2 years of age. The 3rd and 97th percentile values were 31-45% and identical with the mean +/- 2 S.D. values. On a third of the children (251), blood film studies were done and 20% had microcytic hypochromic red blood cells. When an altitude corrected cut-off point of 38% was employed to define anaemia, the prevalence rate was 47.2%, the highest rate (60%) in children 1-2 years. However, use of a cut-off point based on the third percentile or +/- 2 SD (31%), resulted in an underestimation of anaemia rates by 40%. The findings of this study are consistent with previous reports on anaemia rates and haematocrit levels in Ethiopian children residing in a similar environment. Although the iron content of the Ethiopian diet is one of the highest in the world, nutritional anaemia is a public health problem. Intervention measures using iron supplementation and nutrition education through existing primary health care network are recommended.