Objective: To study the importance of Red cell distribution width (RDW) and peripheral smear in Iron Deficiency anemia (IDA) and its correlation with various RBC indices. Method and material: Hundred cases of microcytic (MCV <80fl) anemia (Hb<11 gm %), diagnosed as IDA were enrolled in the study, after getting parental consent. These children's were evaluated for clinical examination, red cell indices, RDW, serum iron and serum total iron binding capacity (TIBC) and transferrin saturation and peripheral blood film (PBF) examination for red cell morphology. Results: The mean RDW in mild, moderate and severe grade of iron deficiency anemia were 16.83±1.24, 18.52%+1.54 and 21.4%+3.15 respectively. The RDW was high in 98% cases of IDA.As the severity of IDA increased the values of RDW increased, serum iron decreased (p<0.001), TIBC increased (p<0.001) and serum transferrin saturation decreased (p<0.001). There was progressive decrease in MCV with increase in severity of anemia and there was corresponding increase in RDW. In mild IDA, the sensitivity of RDW was found to be very high (91%) in comparison to PBF changes (43.47%) cases and was statistically highly significant (p<0.001). In moderate IDA and severe IDA the sensitivity of RDW & PBF changes both were found to be very high. The positive predictive value of RDW and peripheral blood film changes was (100%) in all grades of IDA. The negative predictive value of RDW in mild grade of IDA was 88.23% as compared to 53.57% in PBF. In moderate grade of IDA, NPV of RDW was 100% as compared to 83% in case of PBF. While in severe grade of IDA the NPV of RDW and PBF was recorded to be 100%. Conclusion: The RDW was found to be highly sensitive and effective tool for early diagnosis of mild iron deficiency anaemia therefore; it is recommended that the RDW can be used as an effective tool for the diagnosis of iron deficiency anaemia in early stages, in a large number of samples at major hospitals thereby reducing manpower and time consumption.