BACKGROUND: Diarrhoea causes many deaths in children younger than 5 years and identification of risk factors for death is considered a global priority. The effectiveness of currently recommended fluid management for dehydration in routine settings has also not been examined. METHODS: For this observational, association study, we analysed prospective clinical data on admission, immediate treatment, and discharge of children age 1-59 months with diarrhoea and dehydration, which were routinely collected from 13 Kenyan hospitals. We analysed participants with full datasets using multivariable mixed-effects logistic regression to assess risk factors for in-hospital death and effect of correct rehydration on early mortality (within 2 days). FINDINGS: Between Oct 1, 2013, and Dec 1, 2016, 8562 children with diarrhoea and dehydration were admitted to hospital and eligible for inclusion in this analysis. Overall mortality was 9% (759 of 8562 participants) and case fatality was directly correlated with severity. Most children (7184 [84%] of 8562) with diarrhoea and dehydration had at least one additional diagnosis (comorbidity). Age of 12 months or younger (adjusted odds ratio [AOR] 1·71, 95% CI 1·42-2·06), female sex (1·41, 1·19-1·66), diarrhoea duration of more than 14 days (2·10, 1·42-3·12), abnormal respiratory signs (3·62, 2·95-4·44), abnormal circulatory signs (2·29, 1·89-2·77), pallor (2·15, 1·76-2·62), use of intravenous fluid (proxy for severity; 1·68, 1·41-2·00), and abnormal neurological signs (3·07, 2·54-3·70) were independently associated with in-hospital mortality across hospitals. Signs of dehydration alone were not associated with in-hospital deaths (AOR 1·08, 0·87-1·35). Correct fluid prescription significantly reduced the risk of early mortality (within 2 days) in all subgroups: abnormal respiratory signs (AOR 1·23, 0·68-2·24), abnormal circulatory signs (0·95, 0·53-1·73), pallor (1·70, 0·95-3·02), dehydration signs only (1·50, 0·79-2·88), and abnormal neurological signs (0·86, 0·51-1·48). INTERPRETATION: Children at risk of in-hospital death are those with complex presentations rather than uncomplicated dehydration, and the prescription of recommended rehydration guidelines reduces risk of death. Strategies to optimise the delivery of recommended guidance should be accompanied by studies on the management of dehydration in children with comorbidities, the vulnerability of young girls, and the delivery of immediate care. FUNDING: The Wellcome Trust.