BACKGROUND: Pediatric observation units (OUs) have demonstrated reductions in lengths of stay (LOS) and costs of care. Hospital-level outcomes across all observation-status stays have not been evaluated in relation to the presence of a dedicated OU in the hospital. OBJECTIVE: To compare observation-status stay outcomes in hospitals with and without a dedicated OU. DESIGN: Cross-sectional analysis of hospital administrative data. METHODS: Observation-status stay outcomes were compared in hospitals with and without a dedicated OU across 4 categories: (1) LOS, (2) standardized costs, (3) conversion to inpatient status, and (4) return care. SETTING/PATIENTS: Observation-status stays in 31 free-standing children's hospitals contributing observation patient data to the Pediatric Health Information System database, 2011. RESULTS: Fifty-one percent of the 136,239 observation-status stays in 2011 occurred in 14 hospitals with a dedicated OU; the remainder were in 17 hospitals without. The percentage of observation-status same-day discharges was higher in hospitals with a dedicated OU compared with hospitals without (23.8 vs 22.1, P < 0.001), but risk-adjusted LOS in hours and total standardized costs were similar. Conversion to inpatient status was higher in hospitals with a dedicated OU (11.06%) compared with hospitals without (9.63%, P < 0.01). Adjusted odds of return visits and readmissions were comparable. CONCLUSIONS: The presence of a dedicated OU appears to have an influence on same-day and morning discharges across all observation-status stays without impacting other hospital-level outcomes. Inclusion of location of care (eg, dedicated OU, inpatient unit, emergency department) in hospital administrative datasets would allow for more meaningful comparisons of models of hospital care.