Malnutrition is still highly prevalent in developing countries. Studies have shown an increase in the number of obese individuals in very poor urban communities. This review shows a co-existence between malnutrition and obesity in households of slums in Brazil and a higher prevalence of stunted/overweight or obese individuals (30%) in comparison with stunted/underweight (16%). These conditions are associated with important metabolic changes. Results from stunted children showed higher susceptibility to the effects of higher fats diets, lower fat oxidation, higher central fat, and higher body fat gain. A model to explain how early malnutrition alters energy balance in adults is outlined. In the presence of a relative food intake insufficiency, a higher cortisol:insulin ratio, associated with lower levels of IGF-1 will lead to lower muscle gain and linear growth, impaired lypolysis and fat oxidation. When these hormonal changes are combined with a higher fat/carbohydrate and/or marked decreased in physical activity, obesity with short stature will occur.