It has been hypothesized that margarine intake is associated with allergic diseases. However, the epidemiological evidence in children is limited. The aim of the present study was to assess the relationship between dietary intake of margarine and butter with eczema and allergic sensitization in 2-yr-old children. Data of 2582 children at the age of 2 yr with complete information on exposure to diet and allergic outcome were analyzed in a German prospective birth cohort study (LISA). Margarine and butter intake were estimated from a semiquantitative food frequency questionnaire about general fat use at home combined with questions on the child's spread intake. Multiple logistic regression analysis was applied comparing predominant margarine and predominant butter intake with consumption of both butter and margarine. Predominant margarine intake was positively associated with lifetime prevalence of symptomatic eczema (aOR: 1.71; 95% CI: 1.12–2.61) and doctor-diagnosed eczema (aOR: 2.10; 95% CI: 1.36–3.25) and allergic sensitization against inhalant allergens (aOR: 2.10; 95% CI: 1.01–4.41) at the age of 2 yr. No statistically significant associations were found for butter intake. Stratification for parental history of atopic diseases indicated that children at high risk of atopic diseases have higher effect estimates for margarine intake compared to children without parental history of atopic diseases. Stratification for sex also showed higher effect estimates in boys. Children with predominant margarine consumption had an increased risk for eczema and allergic sensitization, while butter intake was no predictor for allergic diseases. However, we could not determine whether margarine is a causal risk factor or whether other lifestyle factors have influenced this association.