Poor child gut health, resulting from a lack of access to an improved toilet or clean water, has been proposed as a biological mechanism underlying child stunting and oral vaccine failure. Characteristics related to household sanitation, water use, and hygiene were measured among a birth cohort of 270 children from peri-urban Iquitos Peru. These children had monthly stool samples and urine samples at four time points and serum samples at (2-4) time points analyzed for biomarkers related to intestinal inflammation and permeability. We found that less storage of fecal matter near the household along with a reliable water connection were associated with reduced inflammation, most prominently the fecal biomarker myeloperoxidase (MPO) (no sanitation facility compared with those with an onsite toilet had -0.43 log MPO, 95% confidence interval [CI]: -0.74, -0.13; and households with an intermittent connection versus those with a continuous supply had +0.36 log MPO, 95% CI: 0.08, 0.63). These results provide preliminary evidence for the hypothesis that children less than 24 months of age living in unsanitary conditions will have elevated gut inflammation.