We used a prospective, longitudinal cohort enrolled as part of a program evaluation to assess the relationship between drinking water microbiological quality and child diarrhea. We included 50 villages across rural Bangladesh. Within each village field-workers enrolled a systematic random sample of 10 households with a child under the age of 3 years. Community monitors visited households monthly and recorded whether children under the age of 5 years had diarrhea in the preceding 2 days. Every 3 months, a research assistant visited the household and requested a water sample from the source or container used to provide drinking water to the child. Laboratory technicians measured the concentration of Escherichia coli in the water samples using membrane filtration. Of drinking water samples, 59% (2,273/3,833) were contaminated with E. coli. Of 12,192 monthly follow-up visits over 2 years, mothers reported that their child had diarrhea in the preceding 2 days in 1,156 (9.5%) visits. In a multivariable general linear model, the log10 of E. coli contamination of the preceding drinking water sample was associated with an increased prevalence of child diarrhea (prevalence ratio = 1.14, 95% CI = 1.05, 1.23). These data provide further evidence of the health benefits of improved microbiological quality of drinking water.