Some studies found that providing micronutrient powder (MNP) causes adverse health outcomes; modifying factors are unknown. We aimed to investigate if iron status and inherited hemoglobin disorders (IHbD) modify the impact of MNP on growth and diarrhea among young Lao children. In a double-blind controlled trial, 1704 children ages 6-23mo were randomized to: daily MNP (with 6mg iron plus 14 micronutrients) or placebo for ~36wks. IHbD, and baseline and final hemoglobin (Hb), iron status, and anthropometrics were assessed. Caregivers provided weekly morbidity reports. At enrollment 55.6% were anemic; only 39.3% had no sign of clinically significant IHbD. MNP had no overall impact on growth and longitudinal diarrhea prevalence. Baseline Hb modified the effect of MNP on LAZ (P for interaction=0.082). Among children who were initially non-anemic, final mean LAZ in the MNP group was slightly lower (−1.93 (95%CI: −1.88, −1.97)) vs. placebo (−1.88 (95%CI: −1.83, −1.92)), and the opposite occurred among initially anemic children (final mean LAZ −1.90 (95% CI: −1.86, −1.94) in MNP vs. −1.92 (95% CI: −1.88, −1.96) in placebo). IHbD modified the effect on diarrhea prevalence (P=0.095). Among children with IHbD, the MNP group had higher diarrhea prevalence (1.37 (95%CI: 1.17, 1.59) vs. 1.21 (95%CI: 1.04, 1.41)), while it was lower among children without IHbD who received MNP (1.15 (95%CI: 0.95, 1.39) vs. 1.37 (95%CI: 1.13, 1.64)). In conclusion, there was a small adverse effect of MNP on growth among non-anemic children and on diarrhea prevalence among children with IHbD.