A health impact evaluation of the Rural Sanitation Pilot Project in Mohale's Hoek district, Lesotho, was conducted from October 1987 to September 1988. A clinic-based case-control design was used to investigate the impact of improved sanitation on diarrhoea morbidity in young children. The results indicate that under-5-year-olds from households with a latrine may experience 24% fewer episodes of diarrhoea than such children from households without a latrine (odds ratio = 0.76; 95% confidence interval, 0.58-1.01). The impact of latrines on diarrhoea was greater in those households that used more water, practised better personal hygiene, and where the mothers had a higher level of education or worked outside the home. In common with studies conducted in Malawi, Philippines, and Sri Lanka, little evidence was found that the relationship between latrine ownership and diarrhoea was confounded by socioeconomic status or environmental variables. For a sample of cases and controls, data on exposure status (presence or absence of a latrine) that were collected by interview at the clinics agreed closely with those obtained by observation during a home visit.