Exposure to environmental tobacco smoke (ETS) is a major cause of morbidity and mortality among U.S. children. Despite African-American children's having a lower reported exposure to tobacco compared to whites, they suffer disproportionately from tobacco-related illnesses and have higher levels of serum cotinine than white children. The goal of this study was to test whether African-American children have higher levels of serum and hair cotinine, after accounting for ETS exposure and various housing characteristics. We investigated the level of cotinine in both hair and serum in a sample of 222 children with asthma. Using a previously validated survey for adult smokers, we assessed each child's exposure to ETS. We collected detailed information on the primary residence, including home volume, ventilation, and overall home configuration. Despite a lower reported ETS exposure, African-American children had higher mean levels of serum cotinine (1.41 ng/mL vs. 0.97 ng/mL; p = 0.03) and hair cotinine (0.25 ng/mg vs. 0.07 ng/mg; p < 0.001) compared with white children. After adjusting for ETS exposure, housing size, and other demographic characteristics, serum and hair cotinine levels remained significantly higher in African-American children (ss = 0.34, p = 0.03) than in white children (ss = 1.06, p < 0.001). Housing volume was significantly associated with both serum and hair cotinine but did not fully explain the race difference. Our results demonstrate that, despite a lower reported exposure to ETS, African-American children with asthma had significantly higher levels of both serum and hair cotinine than did white children. Identifying causes and consequences of increased cotinine may help explain the striking differences in tobacco-related illnesses.