BACKGROUND Anemia of chronic disease (ACD) and iron deficiency anemia (IDA) are the two most prevalent forms of anemia having interrelated characteristics. Hepcidin, a newly introduced biomarker for assessment of iron status, is a homeostatic regulator of iron metabolism. We investigated the role of hepcidin and other conventional iron parameters to assess iron status among children with ACD and IDA. We also identified children with ACD who developed iron deficiency (ID). METHODS The study was undertaken in anemic children with 30 cases each of ACD and IDA along with 30 age and sex-matched controls. The ACD cases were subdivided into pure ACD and ACD with coexistent ID. All cases were subjected to following tests: complete blood count with peripheral smear, serum C-reactive protein, serum interleukin-6, iron studies, serum soluble transferrin receptor (sTfR), and serum hepcidin. RESULTS The mean serum hepcidin concentration was significantly increased in pure ACD patients (143.85±42.76 ng/mL) as compared to those in IDA patients (6.01±2.83 ng/mL, P < 0.001) and controls (24.96±9.09 ng/mL, P <0.001). Also, compared to pure ACD patients [normal sTfR levels (<3 µg/mL)], the serum hepcidin concentration was reduced significantly in ACD patients with ID [high sTfR levels (≥3 µg/mL)] with a mean of 10.0±2.97 ng/mL. CONCLUSIONS Hepcidin measurement can provide a useful tool for differentiating ACD from IDA and also help to identify an iron deficiency in ACD patients. This might aid in the appropriate selection of therapy for these patients.