Low birthweight (LBW) occurs in 17% of births in developing countries and many of them are full term. The subsequent development of LBW term infants is poorer than higher birthweight children and more likely to be affected by poor social circumstances. We investigated the effects of morbidity and breastfeeding on the development of these LBW term infants. Two parallel cohorts (n = 131 + 131) of LBW term (1500-2499 g) and higher birthweight (3000-3499 g) infants were recruited from six maternity centers in northeast Brazil. The longitudinal prevalence of morbidity and the frequency of breastfeeding over the first 6 mo of life were assessed. The infants' development was assessed on the Bayley Scales at 6 and 12 mo, and we previously reported that the low birthweight group had lower scores than the higher birthweight group. Hospitalizations in the first 6 mo were negatively associated with 6-mo and 12-mo Bayley scores in both groups. Among LBW infants, but not higher birthweight infants, there were significant associations between the prevalence of diarrhea and mental and motor development at 6 mo and mental development at 12 mo. Breastfeeding frequency in the first 4 wk of life was positively associated with mental development in both birthweight groups at 6 mo but not at 12 mo. Breastfeeding beyond 4 wk was not associated with the children's development. We conclude that low birthweight infants are especially vulnerable to the effects of diarrhea, and the greater frequency and differential effect of diarrhea partly explains their poorer development.