Background Acute lower respiratory infections are the commonest cause of morbidity and potentially preventable mortality in Indigenous infants. Infancy is also a critical time for post-natal lung growth and development. Severe or repeated lower airway injury in very young children likely increases the likelihood of chronic pulmonary disorders later in life. Globally, bronchiolitis is the most common form of acute lower respiratory infections during infancy. Compared with non-Indigenous Australian infants, Indigenous infants have greater bacterial density in their upper airways and more severe bronchiolitis episodes. Our study tests the hypothesis that the anti-microbial and anti-inflammatory properties of azithromycin, improve the clinical outcomes of Indigenous Australian infants hospitalised with bronchiolitis. Methods We are conducting a dual centre, randomised, double-blind, placebo-controlled, parallel group trial in northern Australia. Indigenous infants (aged = 24-months, expected number = 200) admitted to one of two regional hospitals (Darwin, Northern Territory and Townsville, Queensland) with a clinical diagnosis of bronchiolitis and fulfilling inclusion criteria are randomised (allocation concealed) to either azithromycin (30 mg/kg/dose) or placebo administered once weekly for three doses. Clinical data are recorded twice daily and nasopharyngeal swab are collected at enrolment and at the time of discharge from hospital. Primary outcomes are 'length of oxygen requirement' and 'duration of stay,' the latter based upon being judged as 'ready for respiratory discharge'. The main secondary outcome is readmission for a respiratory illness within 6-months of leaving hospital. Descriptive virological and bacteriological (including development of antibiotic resistance) data from nasopharyngeal samples will also be reported. Discussion Two published studies, both involving different patient populations and settings, as well as different macrolide antibiotics and treatment duration, have produced conflicting results. Our randomised, placebo-controlled trial of azithromycin in Indigenous infants hospitalised with bronchiolitis is designed to determine whether it can reduce short-term (and potentially long-term) morbidity from respiratory illness in Australian Indigenous infants who are at high risk of developing chronic respiratory illness. If azithromycin is efficacious in reducing the morbidly of Indigenous infants hospitalised with bronchiolitis, the intervention would lead to improved short term (and possibly long term) health benefits.