Few studies have attempted to establish the burden of childhood malnutrition and the associated factors among households of HIV-positive mothers/caregivers particularly in urban settings. There is also no satisfactory evidence of health and nutritional benefits of food aid in this particular group where options to attain a balanced diet are generally minimal. A cross-sectional survey was therefore organized to assess the prevalence of malnutrition and establish the contributory factors that would be vital in design of interventions. The target group was children under five years of age (6-59 months) of HIV-positive mothers/caregivers residing in an urban setting of Uganda. Interviews were conducted with a random sample of 144 households of HIV-positive mothers/caregivers of children under the age of five years in Jinja municipality in Eastern Uganda. Nutritional status was determined on every randomly selected index child from sampled households. Epi-Info 2002 was used for calculation of z-scores and Nutrisurvey for SMART (2005) for drawing anthropometric charts. SPSS version 12 was then used for descriptive statistics, bivariate and multivariate analyses. For all the statistical tests, P≤0.05 was considered significant. The proportion of stunted children (23%) among study households was nearly 12 times higher, underweight (11%) more than five times higher and wasting (3.5%) about two times higher than the level expected in a healthy, well-nourished population. Malnutrition among children under five years of age in households of mothers/caregivers living with HIV/AIDS in Ugandan urban settings is therefore of public health concern. The identified causative factors include high malaria and fever episodes, high dependency ratio, low food access, low Socio-Economic Status (SES) and low education level of mother/caregiver. Interventions to address malnutrition in this vulnerable group should therefore aim at addressing the identified contributory factors. Use of insecticide-treated mosquito nets (ITNs) and campaigns to ensure their proper use, income generating activities, and kitchen gardening are some of the targeted interventions that could contribute to alleviation of the problem. Food aid to supplement the diet contributes to daily energy requirements.