OBJECTIVE We examined demographic and socioeconomic differences in the consumption of sugar-sweetened beverages (SSBs), its association with dental caries in children, and whether exposure to water fluoridation modifies this association. METHODS In a cross-sectional study, we used a stratified, clustered sampling design to obtain information on 16 508 children aged 5 to 16 years enrolled in Australian school dental services in 2002 to 2005. Dental staff assessed dental caries, and parents completed a questionnaire about their child's residential history, sources of drinking water, toothbrushing frequency, socioeconomic status (SES), and SSB consumption. RESULTS Children who brushed their teeth less often and were older, male, of low SES, from rural or remote areas consumed significantly more SSBs. Caries was significantly associated with greater SSB consumption after controlling for potential confounders. Finally, greater exposure to fluoridated water significantly reduced the association between children's SSB consumption and dental caries. CONCLUSIONS Consumption of SSBs should be considered a major risk factor for dental caries. However, increased exposure to fluoridated public water helped ameliorate the association between SSB consumption and dental decay. These results reconfirm the benefits of community water fluoridation for oral health.