From January 1990 to December 1991, 16 patients with multidrug-resistant tuberculosis (MDR-TB) caused by Mycobacterium tuberculosis resistant to isoniazid, rifampin, and streptomycin were diagnosed at Elmhurst Hospital. Compared with other TB patients, MDR-TB patients were more likely to have human immunodeficiency virus (HIV) infection (14/16 vs. 21/204, P < .001) and a prior admission (10/16 vs. 3/204, P < .001). HIV-infected patients hospitalized for > 10 days within three rooms of an infectious MDR-TB patient had higher risk of acquiring MDR-TB than did HIV-infected patients with shorter hospitalizations or locations further from the MDR-TB patient(s) (6/28 vs. 2/90, P < .001). Isolates of 6 of 8 MDR-TB patients in a chain of transmission were identical by restriction fragment length polymorphism DNA typing. Ambulation on the wards of inadequately masked TB patients and lack of negative pressure in isolation rooms probably facilitated transmission. This report documents nosocomial transmission of MDR-TB and underscores the need for effective isolation practices and facilities in health care institutions.