Objective: The present analysis aimed to observe nutritional impacts among children <5 years of age by mother's engagement in paid employment. Design: Between 1996 and 2012, 21 443 children <5 years of age with diarrhoea attended the International Centre for Diarrhoeal Disease Research, Bangladesh (icddr, b), Dhaka Hospital. They were enrolled in the hospital-based Diarrhoeal Disease Surveillance System and their relevant information was extracted from the electronic database. Setting: The icddr,b, Bangladesh. Subjects: The analytic sample was 19 597 children aged <5 years who had a mother aged ≤35 years with or without engagement in paid employment. Results: Eleven per cent of the mothers (n 2051) were currently engaged in paid employment on behalf of the family. Univariate analysis showed that children with mothers engaged in paid employment had a 1·14 times higher risk of being undernourished, a 1·20 times of higher risk of being stunted, a 1·21 times higher risk of being wasted and a 1·31 times higher risk of being underweight (risk ratios) than were children with mothers not likewise engaged. Multivariate analysis showed that such associations remained significant for stunting (1·08; 95 % CI 1·00, 1·16), wasting (1·15; 95 % CI 1·06, 1·25) and underweight (1·09; 95 % CI 1·02, 1·17) after controlling for covariates. Conclusions: Mothers' engagement in income-generating employment was associated with undernutrition in children <5 years of age in urban Bangladesh.