Both wasting and undernutrition are responsible for multiple morbidities and increased mortality in younger children hospitalized for acute illnesses. The question of whether children who are suffering from severe underweight are as vulnerable as children suffering from severe wasting needs to be researched further. We aimed to compare the morbidity and mortality of severely underweight but not severely wasted (SU-nSW) children with that of severely wasted (SW) children admitted to inpatient wards of a hospital. Data from 12,894 children aged < 5 years were collected using cross-sectional methods from Dhaka Hospital, International Centre for Diarrhoeal Disease Research, Bangladesh between March 2019 and December 2021. After exclusion of non-desired populations (N = 8,834), comparisons between SU-nSW (N = 1,876) and SW (N = 2,184) children were observed. The risk of morbidities and mortality among SU-nSW and SW children was analyzed after adjusting for age and sex. Inpatient morbidities were mostly similar among children with sepsis (adjusted odds ratio [aOR]: 0.90; 95% CI: 0.69, 1.19; P = 0.472) and convulsions (aOR: 0.84; 95% CI: 0.51, 1.37; P = 0.475). Dehydration (aOR: 0.71; 95% CI: 0.62, 0.81; P < 0.001) and hypokalemia (aOR: 0.58; 95% CI: 0.42, 0.79; P = 0.001) were more likely associated with SW children than with SU-nSW children. Pneumonia/severe pneumonia was more likely to affect SU-nSW children (aOR: 1.24; 95% CI: 1.02, 1.48; P = 0.018). Death was comparable between the two groups (aOR: 1.32; 95% CI: 0.70, 2.49; P = 0.386). This study underscores the importance of implementing present treatment guidelines for severe acute malnutrition in the facility-based management of severely underweight children as well.