Three cases of hemolytic uremic syndrome with bloody diarrhea occurred during an outbreak of diarrheal illness in children aged 4 months to 9 years who attended a day care center. Thirty-six (34%) of 107 had diarrhea (three or more loose or watery stools in 24 hours) lasting greater than or equal to 3 days. Thirty-one (48%) of 64 children younger than 4 years of age but only (12%) of 43 in the older classes became ill (relative risk 4.0, P less than 0.001). Eleven (31%) of the 36 children with diarrhea had blood in their stools. Sequential movement of illness from class to class was consistent with person-to-person spread. Ten (18%) of 56 family members of ill children but only one of 45 family members of well children younger than 4 years of age developed a diarrheal illness (P less than 0.05). Escherichia coli O157:H7 was detected in two of eight stool specimens from children who had bloody diarrhea (one with hemolytic uremic syndrome), two of seven with nonbloody diarrhea, and none of nine who remained well. All three stool specimens obtained at less than or equal to 6 days compared with one of nine obtained at greater than 6 days after onset yielded this organism (P less than 0.02). E. coli O157:H7 can cause hemolytic uremic syndrome and both nonbloody and bloody diarrhea, and can spread within families and through modes other than foodborne transmission.