Atopic dermatitis is common in infancy. The role of food allergy in atopic dermatitis of infancy is unclear. We examined the relationship between atopic dermatitis and immunoglobulin E (IgE)-mediated food allergy in infancy. A birth cohort of 620 infants with a family history of eczema, asthma, hayfever or immediate food allergy in a parent or sibling: 487 children had complete data including skin prick tests (SPTs) to evaluate IgE-mediated food allergy to cow milk, egg and peanut. Participants were grouped as no atopic dermatitis (Gp 0) or in quartiles of increasing severity of atopic dermatitis (Gps 1–4) quantified by days of topical steroid use as reported monthly. Adverse reactions to foods were recorded. The cumulative prevalence of atopic dermatitis was 28.9% to 12 months (10.3% of the cohort of moderate severity). As atopic dermatitis severity increased so did the prevalence of IgE-mediated food allergy (Gp 0, 40/346 vs. Gp 1, 6/36 vs. Gp 2, 8/35 vs. Gp 3, 12/35 vs. Gp 4, 24/35; χ2 = 76; p < 10−6), and the frequency of reported adverse food allergy reactions (Gp 0, 43/346 vs. Gp 1, 4/36 vs. Gp 2, 8/35, vs. Gp 3, 5/35, vs. Gp 4, 13/35; χ2 = 17; p = 0.002). The relative risk of an infant with atopic dermatitis having IgE-mediated food allergy is 5.9 for the most severely affected group. Atopic dermatitis is common in infancy. There is a strong association between IgE-mediated food allergy and atopic dermatitis in this age group.