Despite the large and growing number of humanitarian emergencies, there is very little economic research on the impact of refugees and internally displaced people on the communities that receive them. This paper analyzes the impact of the refugee inflows from Burundi and Rwanda in 1993 and 1994 on host populations in Western Tanzania. The analysis shows large increases in the prices of non-storable food items. Examination of household spending and assets show positive wealth effects of refugee camps on nearby villages. This contradicts anecdotal evidence, and suggests that under certain conditions, the interaction between refugees and their hosts may result in positive welfare effects for local residents.