During a 6-w period from 20 April through 7 June 1986, an outbreak of giardiasis occurred in residents and employees of a nursing home and children participating in day care at the nursing home. Eighty-eight cases of giardiasis (defined by presence of clinical symptoms or results of stool examination) were identified from groups associated with the nursing home including 35 in nursing home residents, 15 in children in day care, and 38 in employees (including kitchen staff and child care providers). Multiple modes of transmission of Giardia lamblia, including food-borne and person-to-person transmission, occurred for these groups. Evidence of transmission by food included a significant association between sandwich consumption and illness in nursing home staff (P = .04) and a significant lack of illness among nursing home residents who consumed only a pureed diet (P = .007), where all food items are cooked before serving. The primary case among the food handlers, whose illness began in mid-April, had an infected child in the day care center. Person-to-person transmission is supported by a significant association between illness and physical contact with children from the day care facility through an "adopted grandparent" program (P = .03). This is the first reported outbreak of giardiasis in a nursing home, and these findings have implications for disease control in other facilities that combine child day care and care of the elderly.