There have been no previous longitudinal studies of otitis media conducted in non-Aboriginal Australian children. This paper describes the rate and risk factors for middle ear effusion (MEE) in children attending day care in Darwin, Australia. A prospective cohort study of 252 children under 4 years was conducted in 9 day care centres over 12 fortnights between 24 March and 15 September 1997. Tympanometry was conducted fortnightly and multivariate analysis used to determine risk factors predicting MEE. The outcome of interest was the rate of type B tympanograms per child detected in either ear at fortnightly examinations. After adjusting for clustering by child, MEE was detected on average 4·4 times in 12 fortnights (37% of all examinations conducted). Risk factors associated with presence of effusion were younger age, a family history of ear infection, previous grommets (tympanostomy tubes), ethnicity and the day care centre attended. A history of wheeze appeared protective. These effects were modest (RR 0·57–1·70). Middle ear effusion is very common in children attending day care in Darwin. This has clinical importance, since MEE during early childhood may affect optimal hearing, learning and speech development. There is little scope for modification for many of the risk factors for MEE predicted by this model. Further study of the day care environment is warranted.