The objective of this study was to compare the nutritional status and health problems of village orphans, non-orphans and orphanage children, and to identify factors associated with undernutrition. A cross-sectional study was conducted in three orphanages and two villages near Blantyre, Malawi. Seventy-six orphanage children, 137 village orphans and 80 village non-orphans were recruited. Anthropometric measurement was done and guardians were interviewed. In the group of children aged < 5 years, the prevalence of undernutrition in orphanage children was 54.8% compared with 33.3% and 30% of village orphans and non-orphans, respectively. Sixty-four per cent of young orphanage children were stunted compared with 50% of village orphans and 46.4% of non-orphans. The mean (SD) Z-score of height/age was significantly lower in the orphanage group, -2.75 (1.29) compared with -2.20 (1.51) and -1.61 (1.57) in the village orphan and non-orphan groups (p < 0.05). Conversely, older orphanage children (> or = 5 years) were less stunted and wasted than orphans and non-orphans in villages. Illness of children in the last month was reported to be higher in the non-orphan group, especially diarrhoeal disease, which occurred in 30% compared with 10.8% of village orphans and 6.6% of orphanage children. More than three children in a family being cared for by guardians was significantly associated with undernutrition. Orphanage girls were more likely to be malnourished than orphanage boys. Children who had been admitted to an orphanage for more than a year were less malnourished. In village orphans, there was no association between undernutrition and duration of stay in extended families. Age and education of guardians were not associated with the nutritional status of children. We conclude that young orphanage children are more likely to be undernourished and more stunted than village children. Older orphanage children seem to have better nutrition than village orphans. There was no significant difference in nutritional status between village orphans and non-orphans.