The high incidence of anemia of infection among children in developing countries is not well characterized. We investigated the relationship between diarrhea, fever and other risk factors for anemia in young children in the community. The relationship between risk factors for anemia was examined in a cross-sectional study of 85 229 children, aged 6–59 months, from impoverished families in rural areas of Indonesia. The prevalence of anemia was 56.1% among the study subjects. Those considered anemic were more likely to be younger, male, stunted, underweight, wasted, to have low maternal and paternal education and to have current diarrhea or history of diarrhea in the previous 7 days compared with children without anemia (all P < 0.0001). In separate multivariate models adjusted for age, sex, stunting, maternal age and education, and weekly per capita household expenditure, current diarrhea (OR 1.15, 95% CI 1.07–1.325, P < 0.0001) and a history of diarrhea in the previous 7 days (OR 1.16, 95% CI 1.09–1.25, P < 0.0001) were associated with an increased risk of anemia. In similar models, current fever had a borderline association with anemia (OR 1.14, 95% CI 0.98–1.32, P = 0.09). We conclude that diarrhea is a contributing factor of anemia among young children living in rural areas in Indonesia.