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Abstract Background Data relating to hospital admissions of very young children for wheezing illness have been conflicting. Our primary aim was to assess whether a previous increase in hospital admissions for lower respiratory illness had continued in young Swedish children. We have included re-admissions in our analyses in order to evaluate the burden of lower respiratory illness in very young children. We have also assessed whether changes in the labelling of symptoms have affected the time trend. Methods A retrospective, population based study was conducted to assess the time trend in admissions and re-admissions for lower respiratory illness. Data were obtained from the Swedish Hospital Discharge Register for all children with a first hospital admission before nine years of age, a total of 109,176 children. The register covers more than 98% of all hospital admissions in Sweden. The coding of diagnoses was based on ICD-9 from 1987 to 1996 and ICD-10 from 1997. Results The first admission rates declined significantly in children with a first admission after two years of age. However, an increasing admission trend was observed in children aged less than one year and 35% of first admissions occurred in this age group. The annual increase was 3.8% (95% CI 1.3–6.3) in boys and 5.0% (95% CI 2.4–7.6) in girls. A diagnostic shift appeared to occur when ICD-10 was introduced in 1997. The asthma and pneumonia admission rate in children aged less than one year levelled off, whereas the increase in admissions for bronchitis continued. The re-admission rates for asthma decreased and the probability of re-admission was higher in boys. National drug statistics demonstrated a substantial increase in the delivery of inhaled steroids to all age groups but most prescriptions occurred to children aged one year or more. Conclusion Hospital admissions for lower respiratory illness are still increasing in children aged