Polymorphisms in the apolipoprotein E (APOE) have constituted the major rationale to identify potential risk groups for developing late-onset Alzheimer's disease and help to predict recovery of cognitive function after brain injury. However, the APOE impact on cognitive development in children living in poor areas of the developing world, where we have discovered profound significant associations of early childhood diarrhea (at 0–2 y) with lasting impairments of growth, cognition, and school performance, is not known. Therefore, we conducted APOE genotyping in 72 Brazilian shantytown children under active surveillance since birth, using purified DNA extracted from buccal cell samples. We found a high frequency of APOE4 alleles (18% versus 9–11% expected) in children with lower diarrhea burdens. When we examined the children who experienced the heavier diarrhea burdens (greater than or equal to the median of seven illnesses in the first 2 y of life), those with APOE4 did significantly better in the coding subtest (p= 0.01) when compared with APOE4-negative children with similar diarrhea burdens. Positive correlations between the APOE4 occurrence and coding scores remained, even after adjusting for family income, maternal education, and breast-feeding. Moreover, the APOE4-positive group, under heavy burdens of diarrhea, had preserved semantic fluency and the mean difference in fluency scores, p= 0.025, a standardized coefficient for disproportional verbal fluency impairment. Our findings show that APOE4 is relatively common in favela children and suggest a protective role of the APOE4 allele in children with a history of heavy burdens of diarrhea in their first 2 y of life.