Abstract: Objective: To compare supervised vs unsupervised oral iron treatment in anaemic Aboriginal children living in a remote community with a 40% prevalence of iron deficiency anaemia. Methodology: A randomised unblinded clinical trial in children < 6 years presenting to a remote Health Centre with anaemia. Oral iron prescribed as a daily unsupervised dose (group A) was compared to twice weekly supervised administration (group B) over 12 weeks. Parenteral iron (group C) was reserved for failure of oral treatment. Results: Only 3 of 25 children in group A responded to treatment compared to 23 of 26 children in group B (odds ratio = 7.7, 95% confidence interval 2.6–25.0). After six weeks of treatment, the mean haemoglobin rise was 0.96 g/L in group A compared to 10.9 g/L in group B and 12.4 g/L in group C. On entry to the study, 29.4% of subjects were underweight, 33.3% stunted and 35.3% microcephalic. The mean catch-up in weight/height on iron treatment over the study was only 0.28 (0.08, 0.48) Z-scores. Conclusions: Oral iron as directly observed twice weekly treatment is superior to unsupervised therapy. In view of the poor compliance with unsupervised treatment and the high prevalence of iron deficiency anaemia (along with stunting and microcephaly) in Aboriginal children in northern Australia, we propose to undertake in partnership with communities a nutritional intervention program with a high energy weaning food fortified with micronutrients (iron, vitamin A, zinc, folate) as the most effective strategy to address these nutritional problems in the weaning period.