Malnutrition still has a dramatic impact on childhood mortality in sub-Saharan African countries. Very few studies have tried to evaluate the outcome of severely malnourished children treated according to the UNICEF 2004 guidelines and reported fatality rates are still very high. During 2006, 1635 children were admitted to the paediatric ward of St. Luke Catholic Hospital in Wolisso, South West Shewa, Ethiopia. Four hundred and ninety-three (30.15%) were severely malnourished and were enrolled in the study. We reviewed the registration books and inpatient charts to analyze their outcome. A mortality rate of 7.1% was found, which is significantly lower than reported in the literature. 28.6% of deaths occurred within 48 h of admission; the recovery rate was 88.4%; the drop-out rate was 4.5%. Early deaths were due to the poor condition of the children on admission, leading to failure of treatment. Late mortality was considered to be related to electrolyte imbalances, which we were unable to measure. The clinical skills of nursing and medical staff were considered an important factor in improving the outcome of malnourished patients. We found that proper implementation of WHO guidelines for the hospital treatment of severely malnourished children can lead to a relatively low mortality rate, especially when good clinical monitoring is assured.