Aim: The aim of this study was to estimate the prevalence of and hospitalization rate due to diarrhea and to identify factors associated with diarrheal disease and related hospitalizations in children less than two years old in Brazil. Methods: This was a cross-sectional study of 1,902 children who were participants in the 2006 National Demographic and Health Survey (Pesquisa Nacional de Demografia e Saúde da Criança e da Mulher -PNDS 2006). To collect data, children's mothers were interviewed. The prevalence of and hospitalization rate due to diarrhea were calculated for the two weeks before the interview and for the last year, respectively. Logistic regression models were fitted to identify the prevalence of diarrhea and the risk factors associated with diarrhea occurrence and related hospitalizations. A complex sample statistical technique was applied for all analyses. Results: The prevalence of diarrhea and hospitalization rate due to diarrhea were 11.9% and 2.6%, respectively. Children living in the North and Northeast regions had a greater risk of diarrhea, while children under 12 months old, those who were receiving age-appropriate exclusive breastfeeding and those with mothers greater than 35 years old were protected against the disease. Male children living in households that did not have a land-floor in the North and Northeast regions had a higher risk of hospitalization due to diarrhea, while children of mothers who had a higher education level (> 4 years) were protected against it. Conclusion: Diarrhea is still a public health problem for children under two years old in Brazil, especially in the North and Northeast regions. Diarrhea control and prevention programs should inform young mothers with lower education levels about children's healthcare, including the benefits of breastfeeding.