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As a part of an evaluation of the need for a satellite pharmacy to serve two pediatric critical-care units, an observational study was conducted to determine the incidence of medication errors in the units. A pharmacist observed nurses preparing and administering medications in 18 12-hour shifts. Of the nine shifts observed in each unit, five were day shifts and four were night shifts. Five nurses were observed per shift in the intensive-care nursery (ICN) and three nurses per shift in the pediatric intensive-care unit (PICU). The classification of errors was based on the definitions established by the American Society of Hospital Pharmacists. The total error rate was 17.4% in the ICN and 38.0% in the PICU. When the error rates were calculated excluding wrong-time errors, they were 7.1% in the ICN and 11.7% in the PICU. Of 147 errors, 124 (84.4%) occurred with medications with a high potential for serious consequences. The error rates were similar on the day and night shifts in the PICU (42.1% and 31.3%, respectively), but they were significantly higher on the day shifts than the night shifts in the ICN (24.5% and 8.4%, respectively). The number of medication errors in the two units was substantial, and steps were taken to implement a 24-hour pediatric critical-care satellite pharmacy with unit dose drug distribution to reduce the incidence of errors.