Dengue, caused by the four serotypes of dengue virus (DENV), is the most prevalent mosquito-borne viral disease of humans. To examine the incidence and transmission of dengue, the authors performed a prospective community-based cohort study in 5,545 children aged 2-14 years in Managua, Nicaragua, between 2004 and 2010. Children were provided with medical care through study physicians who systematically recorded medical consult data, and yearly blood samples were collected to evaluate DENV infection incidence. The incidence of dengue cases observed was 16.1 cases (range 3.4-43.5) per 1,000 person-years (95% CI: 14.5, 17.8), and a pattern of high dengue case incidence every other year was observed. The incidence of DENV infections was 90.2 infections (range 45.2-105.3) per 1,000 person-years (95% CI: 86.1, 94.5). The majority of DENV infections in young children (<6 years old) were primary (60%) and the majority of infections in older children (≥ 9 years of age) were secondary (82%), as expected. The incidence rate of second DENV infections (121.3 per 1,000 person-years; 95% CI: 102.7, 143.4) was significantly higher than the incidence rate of primary DENV infections (78.8 per 1,000 person-years; 95% CI: 73.2, 84.9). The rigorous analytic methodology used in this study, including incidence reporting in person-years, allows comparison across studies and across different infectious diseases. This study provides important information for understanding dengue epidemiology and informing dengue vaccine policy.