Background: There is limited information on risk factors for pneumonia and pneumonia-related deaths in children who also have diarrhoea. Aim: To identify risk factors for the above in order to improve strategies for case management and to develop appropriate public health messages. Methods: All children under 5 years of age admitted to the Special Care Ward, Dhaka Hospital of the International Centre for Diarrhoeal Disease Research (ICDDR, B) from 1 September to 31 December 2007 were considered for enrollment if they also had diarrhoea. Of the 258 children with diarrhoea enrolled, those with (n=198) or without (n=60) WHO-defined pneumonia constituted the pneumonia and comparison groups, respectively. Among the 198 children with pneumonia, children who survived (n=174) were compared with those who died in hospital (n=24). Results: After adjusting for socio-demographic factors, including low levels of literacy of either parent, low household income, not having a window or exhaust fan in the kitchen, household smoking and over-crowding, children with pneumonia were more likely to sleep on a bare wooden-slatted or bamboo bed (OR 2.7, 95% CI 1.40-5.21, p=0.003) than on other bedding, and were also more likely to have a parent/care-giver with poor knowledge of pneumonia (OR 1.94, 95% CI 1.02-3.70, p=0.043). Independent risk factors for death include severe underweight (OR 5.2, 95% CI 1.2-22.0, p=0.03), hypoxaemia (OR 17.5, 95% CI I 1.9-160.0, p=0.01), severe sepsis (OR 8.7, 95% CI I 1.8-41.5, p=0.007) and lobar consolidation (OR 11.9, 95% CI 2.3-61.6, p=0.003). Conclusions: Increased public awareness of signs of pneumonia and severe sepsis in children under 5 is important to mitigate the risks of pneumonia and pneumonia-related deaths, and the importance of appropriate bedding for young children in reducing the risk of pneumonia needs to be addressed.