Diarrhoeal diseases constitute an important public health problem in many developing countries including Bangladesh. This study aimed to report the household‐level determinants of diarrhoea using the baseline information of cohort studies conducted in 2008 and 2009. The variation of diarrhoea by 3‐month period was also reported. A total of 3,207 households were systematically selected from 12 slums in Dhaka and three rural villages located nearby. The highest prevalence of diarrhoea was found during the period of September to November (22.7%) and the lowest during December to February (9.2%). Slum households were more affected by diarrhoea as compared with the rural households (OR = 1.49; 95% CI = 1.06–2.08; p = 0.020). Other determinants namely provisional house, sharing water source, and sanitary, and use of surface water were also associated with a higher risk of diarrhoea. In conclusion, slum households suffered more from diarrhoea than rural populations. Moreover, the higher burden of diarrhoea were found to be strongly and persistently associated with adverse housing and environmental conditions. Public health strategies based on our findings are required to reduce the burden of diarrhoea in the study population. Particularly multilevel interdisciplinary actions are needed to improving the quality of housing, water, and sanitation facilities in urban slums of Dhaka, and similar settings elsewhere. Copyright © 2013 John Wiley & Sons, Ltd.