We examined endotoxin exposure and wheezing episodes during the first year of life in a birth cohort of 499 infants with one or both parents having a history of asthma or allergy. We measured endotoxin in settled dust from the baby's bed, bedroom floor, family room, and kitchen floor within the first 3 mo after birth. The primary outcomes were any wheeze (versus no wheeze), and repeated wheeze (versus one or no report of wheeze). We found a significant univariate association of elevated endotoxin ( ⩾ 100 EU/ mg) in family room dust with increased risk of any wheeze (Relative Risk = 1.29, 95% CI = 1.03–1.62). The association was not confounded by cockroach allergen, lower respiratory illness (croup, bronchitis, bronchiolitis, and pneumonia), smoking during pregnancy, lower birth weight, maternal asthma, presence of dog, and race/ethnicity in a multivariate model; the multivariate relative risk (RR = 1.33) was marginally significant (95% CI: 1.00–1.76, p < 0.05). In a multivariate model, controlling for the above covariates, elevated endotoxin in family room dust was significantly associated with increased risk (RR = 1.56, 95% CI = 1.03–2.38) of repeated wheeze. These results suggest that home endotoxin exposure may independently increase risk of any wheeze and repeated wheeze during the first year of life for children with a familial predisposition to asthma or allergy.