The prevalence of iron deficiency among infants and young children living in developing countries is high. Because of its chemical properties—namely, its oxidative potential—iron functions in several biological systems that are crucial to human health. Iron, which is not easily eliminated from the body, can also cause harm through oxidative stress, interference with the absorption or metabolism of other nutrients, and suppression of critical enzymatic activities. We reviewed 26 randomized controlled trials of preventive, oral iron supplementation in young children (aged 0–59 mo) living in developing countries to ascertain the associated health benefits and risks. The outcomes investigated were anemia, development, growth, morbidity, and mortality. Initial hemoglobin concentrations and iron status were considered as effect modifiers, although few studies included such subgroup analyses. Among iron-deficient or anemic children, hemoglobin concentrations were improved with iron supplementation. Reductions in cognitive and motor development deficits were observed in iron-deficient or anemic children, particularly with longer-duration, lower-dose regimens. With iron supplementation, weight gains were adversely affected in iron-replete children; the effects on height were inconclusive. Most studies found no effect on morbidity, although few had sample sizes or study designs that were adequate for drawing conclusions. In a malaria-endemic population of Zanzibar, significant increases in serious adverse events were associated with iron supplementation, whereas, in Nepal, no effects on mortality in young children were found. More research is needed in populations affected by HIV and tuberculosis. Iron supplementation in preventive programs may need to be targeted through identification of iron-deficient children.