An outbreak of diarrheal illness caused by Shigella flexneri 1b and associated with 11 deaths occurred in the Marshall Islands during June and July 1977. A house-to-house survey on Majuro indicated an attack rate of 6.2%. Neither the survey nor a case-control study uncovered a common source of exposure on Majuro, and it is believed that transmission was mainly person-to-person. Socioeconomic factors, type of water supply, distance to municipal water supply, and type of sanitary facility could not be related to the occurrence of illness, but a poor sanitary rating was associated with increased rate of household transmission. Absence of stool culturing for bacteria and false-positive identifications of amebae in stool specimens led to the outbreak's being attributed to Entamoeba histolytica. Subsequent parasitologic examinations and serologic studies indicated that E. histolytica played no role in the outbreak, and suggested that fecal leukocytes were being mistaken for amebae. Improved bacteriologic capabilities will be important in improving the approach to diarrheal illness in the Marshall Islands.