The objective of this study was to assess the prevalence of anemia and the therapeutic and prophylactic response to ferrous sulfate and folic acid. A double-blind, randomized, controlled clinical trial was conducted with 196 children 6 to 24 months of age enrolled in municipal daycare centers in Goiânia, Goiás State, Brazil. The children were assigned to two treatment groups that received a daily dose (5 times a week) of either 4.2mg/kg/day of ferrous sulfate + folic acid (50microg) or 4.2mg/kg/day of ferrous sulfate + folic acid placebo. One of the prevention groups received 1.4mg/kg/day of ferrous sulfate + folic acid (50microg/day) and the other 1.4mg/kg/day of ferrous sulfate + folic acid placebo. Supplementation lasted approximately three months. Baseline anemia prevalence was 56.1% (95%CI: 48.9-63.1). After treatment, anemia prevalence in the folic acid group (14%) was lower than in the placebo group (34.9%) (p = 0.02). After prophylaxis in the non-anemic children, the incidence of anemia did not differ between the groups, but there was an increase in hemoglobin level in the folic acid group (p = 0.003). Iron plus folic acid was effective for the treatment of anemia and improvement of hemoglobin level in non-anemic children.