BACKGROUND: The knowledge of varicella complications and their associated cost may help for a better evaluation of varicella immunization benefits. AIM: To determine frequency, type, outcome and affected population of varicella complications in children requiring hospitalization, and to estimate their direct costs. MATERIAL AND METHODS: Retrospective analysis of medical records of children admitted to four hospitals in Santiago, Chile, due to varicella complications between January 1997 and February 1999. Calculation of direct costs of hospitalizations in a sample of 30 patients. RESULTS: One hundred fifty four patients were identified, 74% were younger than 5 years old, only one was immunocompromised. Complications identified were skin and soft tissue infections in 63%, invasive infections in 25.3%, neurological in 7.1% and miscellaneous in 4.5%. Staphylococcus aureus and Group A beta-haemolytic Streptococcus (GABS) were predominantly isolated. S. aureus was the main agent identified in superficial infections and GABS in invasive infections (sterile sites). Two patients died due to invasive infections (streptococcal toxic shock and S. aureus septicaemia) and 11 required surgical procedures. The average cost per hospitalization was US$ 600 in public hospitals and US$ 1,800 in the private hospital. CONCLUSIONS: Varicella complications requiring hospitalization are due mainly to bacterial infections and they affect immunocompetent toddlers. These complications can be severe and even fatal.