Heptavalent pneumococcal conjugate vaccine (PCV7) was introduced to Japan in 2010. We investigated the impact of PCV7 on childhood community-acquired pneumonia (CAP) and pneumococcal pneumonia (PP). Children aged <5 years living in Chiba city, Japan, who were admitted to hospitals were enrolled to estimate the incidence of CAP based on the mid-year population. PP was determined by the presence of Streptococcus pneumoniae in cultured blood and/or sputum samples of CAP patients. The incidence of CAP and S. pneumoniae isolated from PP patients was compared before (April 2008–March 2009) and after (April 2012–March 2013) the introduction of PCV7 immunization. The annual incidence of CAP was reduced [incidence rate ratio 0·81, 95% confidence interval (CI) 0·73–0·90]. When comparing post-vaccine with pre-vaccine periods, the odds ratio for PP incidence was 0·60 (95% CI 0·39–0·93, P = 0·024). PCV7-covered serotypes markedly decreased (66·6% in pre-vaccine vs. 15·6% in post-vaccine, P < 0·01), and serotypes 6C, 15A, 15C and 19A increased. Multidrug-resistant international clones in the pre-vaccine period (Spain6B-2/ST90, Taiwan19F-14/ST236) decreased, while Sweden15A-25/ST63 was the dominant clone in the post-vaccine period. A significant reduction in the incidence of both CAP hospitalizations and culture-confirmed PP of vaccine serotypes was observed at 2 years after PCV7 vaccination.