A diet based on rice powder, soya-bean oil, glucose, egg-white and salts was given to twenty-six patients of different nutritional status aged 4–18 months with persistent diarrheoa and twenty-five age-matched controls without diarrhoea. Clinical response was monitored during 1 week of dietary treatment and absorption of macronutrients was estimated during a 72 h balance study. Twenty-one patients (81 %) recovered from diarrhoea within 7 d. There were significant relationships between nutritional indices, recovery, and absorption of total energy, fat and N. The absorption of fat, protein and carbohydrate in the better nourished controls without diarrhoea was significantly higher than in patients with persistent diarrhoea with better nutrition or malnutrition. The duration of diarrhoea was significantly longer in lighter patients (weight-for-age < 65% NCHS (1976) standard), in wasted patients (weight/height < 80% of NCHS) and those with mid upper arm circumference (MUAC) less than 110 mm. There were negative relationships between the period of recovery and the coefficient of absorption of fat (P < 0·001), total energy intake (P < 0·01) and MUAC (P < 0·05). Weight-for-age and MUAC showed most effective discriminative power for absorption of nutrients. However, the coefficients of absorption for carbohydrate were not different for any pair of nutritional groups. Absorption of all nutrients was also correlated negatively with severity of persistent diarrhoea on admission. The results of the present study indicate that a rice-based diet is highly effective in the management of persistent diarrhoea, while malnutrition aggravates nutrient malabsorption, increases duration and severity of diarrhoea and less severely malnourished patients do not absorb nutrients as well as healthy controls. Malnutrition and the initial severity of diarrhoea are significant determinants of clinical prognosis and nutrient absorption in persistent diarrhoea.