In August and September 1975, an outbreak of diarrhea occurred in children 1 to 3 1/2 years old attending a day-care center. An investigation revealed overlapping epidemics of shigellosis and giardiasis, with 54% of the children infected with Giardia lamblia. At two other centers 29% and 38% of the children had G. lamblia infection, but none had Shigella. The prevalence of G. lamblia in the day-care children was significantly higher than the 2% prevalence in age-matched children not in day-care centers. Epidemiologic data suggested fecal-oral transmission of the parasite from child to child in the centers and from infected children to other family members.