1. The ability of malnourished children to absorb lactose, sucrose and glucose was tested by perfusing the jejunum. Intestinal motility was measured simultaneously in a perfused segment by a dye dilution technique. These tests were repeated on the same children after 6–16 weeks of treatment. 2. There was a significant correlation between the rate of hydrolysis of disaccharide perfusing the jejunum and the level of disaccharidase activity within the jejunal mucosa. 3. All ten malnourished children had diminished glucose absorption, eight had reduced lactose and six had impaired sucrose hydrolysis and absorption. Children with the most severe mucosal damage had the lowest rate of sugar absorption. The malabsorption of disaccharide was related to the impairment of hydrolysis and not to the malabsorption of the monosaccharide products. 4. Primary hypermotility of the intestine was not a feature of the malnourished group. 5. Water absorption from all infusions occurred only in the treated group. Water entry into the intestinal lumen in the malnourished group was greatest with the most poorly absorbed sugars. 6. The mean transit time of fluid passing down the intestine was inversely correlated with the sugar remaining unabsorbed within the lumen. 7. Treating the malnourished child in hospital produced an increase in glucose, lactose and sucrose absorption. The generalized nature of the malabsorption and the reversibility of the defects suggests that lactose intolerance in these children is related to the nutritional state and not to a genetic predisposition to lactase deficiency.