OBJECTIVES: The cost of medicine is an important factor in any disease treatment. Strengthening health systems to provide such interventions at affordable cost to all children will save many lives. The present study was carried out to determine the total direct cost associated with the treatment of most commonly occurring illness in children. METHODS: The study was carried out prospectively at a pediatric outpatient clinic over a period of 1 year in children (<18 years of age). The data in the prescriptions of patients were captured at the time of consultation. The cost of treatment were calculated for three most commonly occurring diseases upper respiratory tract infection (URTI), acute gastroenteritis (AGE) and reactive airways disease (RAD). RESULTS: A total of 2902 patients were included in the study. URTI (1078, of total patients) were found to be the most commonly occurring disease in children followed by AGE and RAD (468 and 332 patients, respectively). The average number of drug utilized for the treatment of RAD, AGE and URTI were found to be (3.3±0.4, 3.3±0.2 and 3.4±0.4, respectively). The average cost of treatment for RAD was found to be INR416±19, followed by INR184±3 and INR120±2 for AGE and URTI, respectively (1USD=approx INR62). Fifty seven percent of the drugs in AGE were prescribed from the National List of Essential Medicine (NLEM), while drugs prescribed from NLEM in RAD and URTI were (49% and 38%, respectively). In URTI maximum cost were spent on the use of Cough and Cold combinations (42%, of total cost spent on all drugs). While in RAD and AGE maximum cost were spent on the use of Steroids and Probiotics ( 33% and 43%, respectively). CONCLUSIONS:  URTI were found to be the most commonly occurring illness in children. RAD treatment was found to be the most costly treatment among all. These findings help in building evidence regarding the cost of treatment for different childhood illness.