The objective of this study was to evaluate an algorithm for the management of children with persistent/chronic diarrhea at a community level hospital. The study was carried out in the pediatric OPD of a 150 bed trust hospital catering to children from poor, rural and urban slums. Fifty clinically stable children (6 months-5 years old, mean= 19.7 months) with persistent or chronic diarrhea refusing admission, being managed on an outpatient basis, were enrolled prospectively. A detailed history and physical examination were done for each child to ascertain the cause of diarrhea. They were managed using a pre-tested simplified algorithm and monitored for symptom improvement using a questionnaire 15 days, 1 month and 3 months after initiation of therapy. The average cost for treatment of each child was also calculated. Twenty-one (42%) children had persistent diarrhea. Seven (14%) infants with a typical history of lactose malabsorption responded to a trial of WHO feeding protocols or lactose/sucrose free milk. Four (8%) infants had chronic non-specific diarrhea. A total of 71.8%(28/39) of children were treated satisfactorily with albendazole or metronidazole and Cotrimaxazole along with hematinics and multivitamins. Three (6%) children were diagnosed with abdominal tuberculosis. Four (8%) had raised anti-tissue tranglutaminase antibodies (age 18-34 months). The algorithm used was successful in managing all the children with chronic diarrhea. The average cost per managed case was US $10. Further, multi-center evaluations of similar algorithms are needed to validate the observations in the present study. child health care providers in resource poor nations to know the profile, which investigations to order first and when to refer children with persistent/chronic diarrhea to higher centers. The present study was planned to evaluate a simplified algorithm approach with minimal dependence on investigations in the management of children with persistent/chronic diarrhea.