There is little information on the relative efficacy of topical tacrolimus and corticosteroids in the treatment of atopic dermatitis (AD) in children. In a single-centre, prospective, observer-blinded, side-to-side comparative study (ISRCTN65507338), 96 children with moderately severe AD were enrolled. The study aimed to compare the relative effectiveness of the child's usual topical corticosteroid with 0.03% tacrolimus ointment applied for 1 week, and if there was no difference, 0.1% tacrolimus ointment applied for a further week. Topical tacrolimus was found to be more effective than topical corticosteroid in 72 of the 93 children (77%) who completed the study. Using multiple-regression analysis with age, gender, pretreatment surface area affected and pretreatment corticosteroid potency as covariants, the only factor that reduced the chance of observing a beneficial effect with tacrolimus was moderate or potent topical corticosteroid use (OR = 0.13; 95% CI 0.02–0.74).