Arginine and zinc deficiencies, under stress of intestinal damage by infectious agents, may each have severely limiting effects on critical intestinal barrier and absorptive function. As arginine and zinc deficiencies, and multiple enteric infections associated with malnutrition with or without persistent diarrhea, are common in children living in impoverished tropical areas, micronutrient replacement with arginine and zinc may be necessary for the host to fully respond to oral rehydration and nutrition therapy (ORNT). The primary objective of the study is to determine the effect (improvement in HAZ, which is the height-for-age Z score) of supplementation of arginine plus zinc versus placebo (glycine or zinc vehicle) on 12-month linear growth in children living in a Brazilian shantytown (favela). The first of the 2 secondary study objectives is to determine the effect of supplementation of arginine plus zinc versus placebo on the following: number of episodes of diarrhea and days of diarrhea over 12 months; physical development as measured by growth at 6, 24 and 36 months post-treatment (HAZ, weight-for-age Z-score [WAZ], and weight-for-height Z-score [WHZ]); intestinal integrity as measured by the lactulose:mannitol (L:M) ratio at 0, 6 and 12 weeks and inflammation as measured by lactoferrin assay at 0 and 12 weeks; cognitive function testing conducted one time in years 3 to 4.5 of the study when the children are at least 4 years old; and stool pathogens at Weeks 0 and 12. The second of the 2 secondary objectives is to determine the effect of supplementation of zinc versus placebo on: physical development as measured by growth at 12 months post treatment (HAZ, WAZ, and WHZ); and intestinal integrity as measured by L:M ratio at 6 and 12 weeks and inflammation as measured by lactoferrin assay at 0 and 12 weeks. This is a single-center, community-based, placebo-controlled, double-blind phase 3 study of 2 to 36 month old healthy, but malnourished HAZ less than -0.35 (height-for-age Z-score less than median of this population, based on previous ICIDR [International Collaborations in Infectious Disease Research] HAZ values in 2-36 month old children) children. There will be 3 study arms. Each arm will consist of 90 (107) subjects for a total of 270 (321) subjects. The children will be randomly assigned to 3 permuted blocks to assess the effects of zinc, with or without arginine, given under direct observation for 12 weeks on nutritional status (primarily HAZ after 12 months). In addition to the daily visits for the 12-week treatment period, for 1 year all subjects will be visited in their home 2 times a week for assessment of intercurrent diarrhea. The expected duration of subject participation is 3 to 4.5 years. All subjects are expected to be enrolled over the first 1.5-2 years allowing a 1-4 year follow up. The primary endpoint is HAZ at 12 months post treatment, based on past published and preliminary data in the background of the proposal. Long term follow-up is key to detecting effects on cognitive development and duration of improvements in nutritional status (as previously reported that long-term effects are associated with early childhood diarrhea and malnutrition.