To determine the influence of endotoxin on the incidence of acute respiratory illness during the first 2 years of life, we carried out a longitudinal follow-up study, beginning at birth, of 332 children born in Prince Edward Island, Canada. We measured 5-day averaged air endotoxin in the homes of children, whose parents provided information by daily symptom diaries and twice-monthly telephone contact for up to 2 years. Endotoxin concentration was 0.49 +/- 3.49 EU/m3 (geometric mean +/- geometric SD), and number of annualized illness episodes was 6.83 +/- 2.80 (mean +/- SD). A doubling of the air endotoxin concentration was associated with an increase of 0.32 illness episodes per year (p = 0.0003), adjusted for age, year of study, breast-feeding, environmental tobacco smoke, child care attendance, indoor temperature, and income. Indoor mold surface area and fungal ergosterol were not significantly associated with endotoxin. Airborne endotoxin appears to be a risk factor for clinically symptomatic respiratory illnesses during the first 2 years of life independent of indoor fungus.