In March 1976, 128 persons in Camas, Washington, had laboratory-confirmed giardiasis. A questionnaire survey of 498 Camas residents revealed that 3.8% had clinical giardiasis, while none of 318 residents in a control town were ill. No associations between illness and sex, pet ownership, travel, time spent in wilderness areas, public gatherings, or food preference were found. Giardia cysts were recovered from raw water entering the city water treatment system via two streams and also from two storage reservoirs containing chlorinated and filtered stream water. Failure to remove Giardia cysts was attributed to the water plants' inadequate flocculation, coagulation, and sedimentation combined with deterioration of the filter media. Investigation of the watershed revealed no signs of human fecal contamination. Animal trapping in the watershed area yielded three beavers (Castor canadensis) infected with Giardia that were infective for specific pathogen-free beagle pups.