Data on presentation, aetiology, and prognostic indicators of childhood pneumonia, which can help design strategies for controlling the disease, are generally scarce in developing countries. In this paper, the distribution of aetiologic agents, clinical presentation, and evolution of pneumonia cases are described, and the factors associated with duration of pneumonia episode and of hospital admission examined. During June 1994-June 1995, 472 children, aged 6-59 months, with clinical diagnosis of pneumonia, who were admitted to hospital or treated as outpatients, were investigated in Recife, Northeast Brazil. Pneumonia, in most cases, was confirmed by radiology. A combination of methods was used for investigating the aetiology of pneumonia. Data obtained on a large number of clinical, socioeconomic and biological variables were analyzed to determine the prognostic factors for the severity and outcome of pneumonia. Bacteria were identified in 26.7% of the cases, while viruses and mixed infections accounted for 8.4% and 2.7% respectively. Haemophilus influenzae (18.9%), Streptococcus pneumoniae (6.4%), and respiratory syncytial virus (5.0%) were most often identified. The pneumonia case-fatality rate was 0.8%. The best clinical predictors of severity were: lung complications at baseline, tachypnoea (for duration of episode), and chest indrawing (for duration of hospital admission). Young age, low birth-weight, and prolonged fever prior to admission to the study also predicted a more prolonged illness, and under-nutrition was a predictor of longer hospital stay. While the development of new vaccines is an important measure for reducing morbidity and mortality due to pneumonia, emphasis on appropriate case management needs to be maintained, with particular attention to children who show the identified risk factors for a poor prognosis.