Cow's milk allergy in the first year of life is one of the most common problems faced by pediatricians. Both over and under diagnosis is seen. Cow's milk allergy, which is IgE-mediated should be differentiated from milk intolerance due to lactase deficiency or other causes. Cow's milk allergy may effect the gastrointestinal tract, respiratory tract, skin or blood. Anaphylaxis may occur. Diagnosis is made primarily on clinical grounds but skin tests and/or RAST are of value. Elimination and subsequent challenge confirms the diagnosis but challenge is not always necessary. Challenge should not be performed if there is evidence of anaphylaxis. Avoidance is the mainstay of treatment and breastfeeding is the optimal choice. Since antigenically intact cow's milk protein can pass into the breast milk, the mother should avoid excessive intake of milk products herself while breast feeding. Alternatives to breast milk such as soy formulas or hydrolysed casein or whey formulas may be used. Twenty-five percent of milk-sensitive infants are also allergic to soy protein. Hydrolysed casein formulas are more hypoallergenic but are expensive and less palatable. Hydrolysed whey formula, which is comparable in expense to soy formulas but is less allergenic, may prove of value in the management of the milk-allergic infant as well as for prophylaxis in infants from susceptible parents. Parents of infants born to families with bilateral atopic histories may be able to prevent milk allergy by using dietary manipulations which include decreased prenatal maternal milk intake and while breast feeding as well as careful avoidance of milk products in the infant's diet during the first year of life.