This study was undertaken to verify the influence of the use of iron and Vitamin C fortified powdered whole milk on the hemoglobin levels of 238 children, aged 6 to 18 months, seen at a Basic Health Care Unit in the State of São Paulo. The powdered milk was fortified with 9 mg of iron (ferrous sulfate) and 65 mg of Vitamin C for each 100 g of powder. 4 kg/month were distributed to children under one year and 2 kg/month to those over one year of age. Clinical, anthropometric and hematological (hemoglobin level measurements) evaluations were performed at the onset of the study and at three month intervals after the beginning of the supplementation. At the end of the trial, there was still enough milk available to extend the intervention for a group of 39 children who had presented the worst evolution in the first six months. At the onset of the study, 72.6% of the children presented anemia. After 3 and 6 months, these percentages had decreased to 38.9% and 18.5%, respectively. Among the children that were followed-up for 9 months, their were only 2.5% who presented anemia at the end of the intervention. The highest prevalences were found in the 6 to 12 months age group and the best results in the 10 to 18 month group. There was intrafamilial dilution of the milk in 30.7% of the cases. With or without intrafamilial milk sharing, there were significant decreases in anemia occurrences with no differences between the two groups. The use of fortified milk did not affect the children nutritional condition. This study permitted the conclusion that the fortification of foodstuffs, besides being the method of election for the prevention of iron deficiency, is an excellent alternative for the treatment of and recovery from iron deficient anemia in children under two years of age.