BACKGROUND: The Integrated Management of Childhood Illness (IMCI) strategy is designed to address major causes of child mortality at the levels of community, health facility, and health system. We assessed the effectiveness of facility-based IMCI in rural Tanzania. METHODS: We compared two districts with facility-based IMCI and two neighbouring comparison districts without IMCI, from 1997 to 2002, in a non-randomised study. We assessed quality of case-management for children's illness, drug and vaccine availability, and supervision involving case-management, through a health-facility survey in 2000. Household surveys were used to assess child-health indicators in 1999 and 2002. Survival of children was tracked through demographic surveillance over a predefined 2-year period from mid 2000. Further information on contextual factors was gathered through interviews and record review. The economic cost of health care for children in IMCI and comparison districts was estimated through interviews and record review at national, district, facility, and household levels. FINDINGS: During the IMCI phase-in period, mortality rates in children under 5 years old were almost identical in IMCI and comparison districts. Over the next 2 years, the mortality rate was 13% lower in IMCI than in comparison districts (95% CI -7 to 30 or 5 to 21, depending on how adjustment is made for district-level clustering), with a rate difference of 3.8 fewer deaths per 1000 child-years. Contextual factors, such as use of mosquito nets, all favoured the comparison districts. Costs of children's health care with IMCI were similar to or lower than those for case-management without IMCI. INTERPRETATION: Our findings indicate that facility-based IMCI is good value for money, and support widespread implementation in the context of health-sector reform, basket funding, good facility access, and high utilisation of health facilities.