Background. The view that hemoglobin levels in peritoneal dialysis patients should be maintained at 11 to 12 g/dL is based largely on the results of studies in hemodialysis patients. Methods. We studied 13,974 erythropoietin-treated Medicare patients who initiated peritoneal dialysis between 1991 and 1998. Mean hemoglobin levels for the first 6 months of the study and. subsequently, time to first hospitalization and death during a 2-year follow-up were determined. Results. The percentages of patients with hemoglobin levels of < 10, 10 to 10.9, 11 to 11.9, and >= 12 g/dL were 24.6%, 40.6%, 27.6%, and 7.2%. respectively. First-hospitalization and death rates, respectively, were 109.5 and 21.6 per 100 patient-years in nondiabetic patients, and 152.9 and 31.5 in diabetic patients. In nondiabetic patients, adjusted hospitalization hazard ratios for hemoglobin levels of < 10, 10 to 10.9, 11 to 11.9 (reference category), and greater than or equal to12 g/dL were 1.29 (P < 0.0001), 1.15 (P < 0.0001), 1, and 0.98 (NS). respectively. The corresponding adjusted mortality hazard ratios were 1.43 (P < 0.000 1) 1.13 (P < 0.05), 1, and 1.14 (NS). In diabetic patients, hazard ratios of 1.26 (P < 0.0001), 1.07 (NS), 1, and 0.82 (P < 0.01) were observed for hospitalization, and 1.34 (P < 0.0001), 1.18 (P < 0.01), 1, and 0.92 (NS) for mortality. Conclusion. In peritoneal dialysis patients, anemia is associated with hospitalization and mortality in a manner supporting current Kidney Dialysis Outcomes Quality Initiative (K/DOQI) hemoglobin targets. In addition, hemoglobin levels of greater than or equal to12 g/dL are associated with lower hospitalization rates in diabetic patients.