BACKGROUND Bone marrow iron microscopy has been the "gold standard" method of assessing iron deficiency. However, the commonly used method of grading marrow iron remains highly subjective. OBJECTIVE To improve the bone marrow grading method by developing a detailed protocol that assesses iron in fragments, in macrophages around fragments and in erythroblasts. METHODS A descriptive study of marrow aspirates of 303 children (aged 6-60 months) with severe anaemia and 22 controls (children undergoing elective surgery) was conducted at hospitals in southern Malawi (2002-04). RESULTS Using an intensive marrow iron grading method, 22% and 39% of cases and controls had deficient iron stores, and 40% and 46% had functional iron deficiency, respectively. Further evaluation of the iron status classification by the intensive method showed that functional iron deficiency was associated with significantly increased C-reactive protein concentrations (126.7 (85.6) mg/l), and iron stores deficiency with significantly increased soluble transferrin receptor concentrations (21.7 (12.5) mug/ml). CONCLUSIONS Iron assessment can be greatly improved by a more intense marrow examination. This provides a useful iron status classification which is of particular importance in areas where there is a high rate of inflammatory conditions.