Background: Protein energy malnutrition commonly seen in 2 to 5 years of age group in developing countries like in India. This could be due to lack of awareness about nutritive value of foods, faulty feeding practices, ignorance plays a major role in the development of Protein malnutrition in early ages of life. This leads to hampering of physical and mental development of the child. Objectives of current study were: 1) To know the prevalence of protein energy malnutrition among 13-60 months of children. 2) To determine relevance of mid arm circumference measurement with WHO standards. 3) To study the demographic variables associated with Protein energy malnutrition. Methods: The present community based cross sectional study was conducted at urban area of Eluru during the period from Sep 2013 to December 2013. A total of 133 individuals were selected from the field practice area of Alluri Sita Ramaraju academy of medical sciences, Eluru. Results were analyzed and necessary statistical tests like proportions and chi square tests were applied. Results: Out of 133 individuals, the prevalence of severe malnutrition among 13-60 months children was 7.5%; prevalence of mild to moderate malnutrition was 24%. Among the severe malnutrition individuals, 60% from labourer occupation. Classification of mid arm circumference of 2-5 years children compared with World Health Organization weight standards, 87.9% were shown as normal and 70% matching of results with severe malnutrition individuals. Conclusion: Based on the above study results, need to give the training to gross root level workers regarding the measurement of arm circumference of children between the age group of 13-60 months children. Still we can consider mid arm circumference is one of the best tool for consideration of protein energy malnutrition detection at the basic level health point and this is cheap, easy and to be detected at early stage of life.