Objective To study the clinical outcomes of red blood cell (RBC) transfusion practices in critically ill children. Method This prospective cohort study was conducted in a tertiary care pediatric intensive care unit (PICU) from March-2015 to January-2018. Inverse probability of treatment weighting (IPTW) using propensity score analysis was used. Children aged 1 mo to 12 y admitted to the PICU were screened. Patients were classified into 'transfused' and 'nontransfused', based on whether they received a transfusion or not. Patients with hematological malignancies, or immunosuppressant drugs, or those who received repeated transfusions, or received transfusion before admission, or died within 24 h were excluded. The primary outcome was all-cause 28 d mortality. Secondary outcomes were new-onset organ dysfunction, mechanical ventilation duration, and length of PICU and hospital stay. Results A total of 1014 patients [transfused = 277; nontransfused = 737) were included. In IPTW analysis, the risk of all-cause 28 d mortality was 53% higher in transfused than nontransfused patients [hazard ratio = 1.53, 95% CI: 1.18-1.98, p = 0.001 by Log-rank test]. Organ dysfunction was higher in transfused than nontransfused patients [3.8% vs. 1.3%, hazard ratio = 3.0, 95% CI: 1.40-6.48, p = 0.005]. The risk of staying in the mechanical ventilation was similar in both groups [hazard ratio = 1.03, 95% CI: 0.86-1.23, p = 0.756]. The risk of extended stay in the PICU and hospital was 16% and 21% higher in transfused than nontransfused patients [hazard ratio = 1.16, 95% CI: 1.03-1.30; p = 0.005; and 1.21, 95% CI: 1.08-1.36; p = 0.001], respectively. Conclusion Red blood cell transfusion was independently associated with higher all-cause 28 d mortality and morbidities in critically ill children.