Twenty-nine dehydrated, well-nourished infants, who were 3 to 24 months of age and had acute gastroenteritis, were enrolled in a prospective randomized study that compared the safety, efficacy, and costs of oral vs intravenous rehydration. The study was designed to assess the use of a holding room in the emergency room for the outpatient rehydration of dehydrated infants. The oral solution that was used contained 60 mEq/L of sodium, 20 mEq/L of potassium, 50 mEq/L of chloride, 30 mEq/L of citrate, 20 g/L of glucose, and 5 g/L of fructose. Thirteen of 15 patients were successfully rehydrated orally as outpatients; two patients, who were subsequently discovered to have urinary tract infections, required hospitalization due to persistent vomiting. Orally rehydrated outpatients spent a mean of 10.7 hours in the holding room, as compared with intravenously rehydrated inpatients, who were hospitalized for a mean of 103.2 hours. Outpatient oral rehydration therapy was significantly less costly than inpatient intravenous therapy (+272.78 vs +2,299.50). Our results indicate that oral rehydration is a safe and cost-effective means of treating dehydrated children in an outpatient setting in the United States. The use of a holding room for observation in the emergency room can markedly decrease health care costs and unnecessary hospitalizations.