Studies in the Gambia, using the lactulose–mannitol dual-sugar intestinal permeability test (lactulose:mannitol ratio) as a non-invasive way of investigating mucosal damage, have shown that food malabsorption is significantly associated with early growth retardation. In this cross-sectional study, 210 poor urban Nepali children, 0–60 months old, were recruited and measured for height or length and weight, 167 were examined for intestinal permeability and 173 for parasite infection. Weaning and morbidity data were collected from 172 caretakers. Children were mildly stunted (mean height-for-age Z-score −1·45) and underweight (mean weight-for-age Z-score −1·62). The lactulose:mannitol ratio (0·26) was poorer than that of UK children (0·12), but similar to that found in Bengali children of the same age (0·24). Two stages of weaning, the onset supplementary feeding (6 months) and the cessation of breast-feeding (23 months), were shown to have differential impact. In children currently breast-feeding, the duration of supplementation was negatively related to lactose (P<0·001) and lactose:lactulose values (P<0·0001), indicating lactose maldigestion. In children who had ceased breast-feeding, a longer period of lactation was associated with poorer intestinal permeability (P=0·031), and poorer height-for-age (P=0·024), which was an unexpected result. No significant relationships were found between intestinal permeability and growth, or with morbidity and helminth infection, except in children with Giardia lamblia who had worse lactulose:mannitol ratios than those without (0·43 v. 0·25 respectively, P=0·014). It is likely that insults to the gut (e.g. Giardia) and challenges to the immune system (weaning) have a different impact in early and late infancy.