In developing countries, safe piped drinking water is generally unavailable, and bottled water is unaffordable for most people. Purchasing drinking water from community-scale decentralized water treatment and refill kiosks (referred to as isi ulang depots in Indonesia) is becoming a common alternative. This study investigates the association between diarrhea risk and community-scale water treatment and refill kiosk. We monitored daily diarrhea status and water source for 1,000 children 1-4 years of age in Jakarta, Indonesia, for up to 5 months. Among children in an urban slum, rate of diarrhea/1,000 child-days varied significantly by primary water source: 8.13 for tap water, 3.60 for bottled water, and 3.97 for water kiosks. In multivariable Poisson regression analysis, diarrhea risk remained significantly lower among water kiosk users (adjusted rate ratio [RR] = 0.49, 95% confidence interval [CI] = 0.29-0.83) and bottled water users (adjusted RR = 0.45, 95% CI = 0.21-0.97), compared with tap water users. In a peri-urban area, where few people purchased from water kiosk (N = 28, 6% of total population), diarrhea rates were lower overall: 2.44 for well water, 1.90 for bottled water, and 2.54 for water kiosks. There were no significant differences in diarrhea risk for water kiosk users or bottled water users compared with well water users. Purchasing water from low-cost water kiosks is associated with a reduction in diarrhea risk similar to that found for bottled water.