Almost nine million children under 5 years of age die every year. Diarrhea is considered to be the second leading cause of under-five mortality in developing countries. About one out of five deaths is caused by diarrhea. In this paper, we use the newly available data set District Level Household Survey 3 to quantify the impact of access to improved sanitation on diarrheal morbidity for children less than 5 years of age in India. Using propensity score matching, we find that access to improved sanitation reduces the risk of contracting diarrhea by 2.2 percentage points. There is considerable heterogeneity in the impacts of improved sanitation. We find statistically insignificant treatment effects for children in low or middle socioeconomic status households and for girls; however, boys and children in high socioeconomic status households experienced economically significant treatment effects. The magnitude of the treatment effect differs largely by hygiene behavior. Copyright © 2012 John Wiley & Sons, Ltd.