The aim of this study was to compare the incidence of medication errors and the stages of the drug distribution system at which they occur in a United Kingdom (UK) hospital using the ward pharmacy system, a German hospital using the unit dose system and a German hospital using their traditional system. Medication errors were identified by observing the preparation and administration of regularly scheduled solid oral medication. In the UK hospital using the ward pharmacy system, the medication error rate was 8.0% (95% confidence interval 6.2-9.8%). The majority of these errors occurred at the stage of medication administration. In the hospital using the traditional German system, the error rate was 5.1% (4.4-5.8%). With the German unit dose system, the error rate was 2.4% (2.0-2.8%). In both German systems the errors were mainly attributable to the stage of transcription. It was noted that patient turnover was much higher in the wards using the ward pharmacy system and therefore the study sites may not be comparable. However, recommendations can be made in order to reduce the error rate associated with each system. Errors associated with the ward pharmacy system may be reduced if medication is stored in individual patient medicine cabinets and patients' own drugs used. Errors occurring with the traditional system and the unit dose system may be reduced if the original prescription is used for medication administration.