A prospective observational study was conducted on 500 children to evaluate the Integrated Management of Neonatal and Childhood Illnesses (IMNCI) algorithm for diagnosis and referral of children aged 0-59 mo. IMNCI algorithm performed well in diagnosis [except sepsis in 0-7 d (p < 0.01) and malaria in 2-59 mo (p < 0.01)] and referral of under five illnesses. The proportion of children with the mismatch between 'IMNCI' diagnosis and 'Gold Standard' diagnosis were highest (38.7 %) among children 0-7 d of age. The authors conclude that IMNCI algorithm in young children has good sensitivity for referring children with severe illnesses and is a good tool for diagnosis of most of childhood illnesses in under-five children.