The association between home dampness and lower respiratory symptoms in children has been well documented. Whether fungal exposures contribute to this association is uncertain. In a prospective birth cohort of 499 children of parents with asthma/allergies, we examined in-home fungal concentrations as predictors of lower respiratory illnesses (LRI) (croup, pneumonia, bronchitis, and bronchiolitis) in the first year. In multivariate analyses, we found a significant increased relative risk (RR) between LRI and high levels (more than the 90th percentile) of airborne Penicillium (RR = 1.73, 95% confidence interval [CI], 1.23, 2.43), dust-borne Cladosporium (RR = 1.52; CI, 1.02, 2.25), Zygomycetes (RR = 1.96; CI, 1.35, 2.83), and Alternaria (RR = 1.51; CI, 1.00, 2.28), after controlling for sex, presence of water damage or visible mold/mildew, born in winter, breastfeeding, and being exposed to other children through siblings. In a multivariate analysis, the RR of LRI was elevated in households with any fungal level at more than the 90th percentile (RR = 1.86; CI, 1.21, 2.88). Exposure to high fungal levels increased the risk of LRI in infancy, even for infants with nonwheezing LRI. Actual mechanisms remain unknown, but fungi and their components (glucans, mycotoxins, and proteins) may increase the risk of LRI by acting as irritants or through increasing susceptibility to infection.