Nearly nine million children under five years of age die annually. Diarrhea is considered to be the second leading cause of Under-5 mortality in developing countries. About one out of five deaths are caused by diarrhea. In this paper, we use the newly available data set DLHS-3 to quantify the impact of access to improved sanitation on diarrheal morbidity for children under five years of age in India. Using Propensity Score Matching (PSM) and propensity-based weighted regression, we find that access to improved sanitation reduces the risk of contracting diarrhea. Access to improved sanitation decreases child diarrhea incidence by 2.2 percentage points. There is considerable heterogeneity in the impacts of improved sanitation. We neither find statistically significant treatment eects for children in poor household nor for girls, however, boys and high socioeconomic status (SES) children experienced larger treatment effects. The results show that it is important to complement public policies on sanitation with policies that alleviate poverty, improve parent's education and promote gender equity.