Background: Hyponatremia is a common electrolyte imbalance observed in children with pneumonia. Presence of hyponatremia may increase the morbidity and mortality in pneumonia. The purpose of the study was to find the frequency of hyponatremia in 2 months to 5 years old children hospitalized with pneumonia and to correlate the hyponatremia with the severity of pneumonia. Methods: This prospective observational study involved 100 children of 2 months to 5 years, admitted in tertiary care hospital with pneumonia. Subjects were classified as pneumonia and severe pneumonia according to WHO criteria. Relevant demographic, clinical data and outcome of the patients were noted. Serum sodium was analyzed and was correlated with severity of pneumonia. Results: Out of 100 children included in this study, 64 were boys and 36 were girls. Hyponatremia was found in 43.0% of children with pneumonia. Mild hyponatremia was the commonest and seen in 26 children. Mortality was more in children with hyponatremia compared to normonatremia. Conclusion: Hyponatremia is a common electrolyte imbalance found in pneumonia and more commonly seen in severe pneumonia. Hyponatremia is associated with increased mortality.  Keywords: Children, Hyponatremia, Mortality, Pneumonia.