Over a six week time period, an outbreak of giardiasis occurred in residents and employees of a nursing home and in children who attended a day care program held within the nursing home. Multiple modes of transmission of Giardia lamblia, including foodborne and person-to-person transmission were evident. There was an association between eating sandwiches and illness in nursing home staff and a significant lack of illness among nursing home residents who consumed only a pureed diet. The primary case among the food handlers, whose illness began in mid-April, had an infected child in the day care center. Person-to-person transmission was supported by a significant association between illness and physical contact with children from the day care facility through the "adopted grandparent" program. This was the first reported outbreak of giardiasis in a nursing home.