Child undernutrition afflicts >150 million children worldwide, contributing to poor child growth, increased risk of infections, and loss of developmental potential. Animal source foods (ASFs) can ameliorate these problems by providing high-quality, high-density, bioavailable protein and micronutrients. However, many children in developing countries lack ASFs in their diet. The objective was to assess the impact of milk on child growth and development in rural Nepal. A 4-year longitudinal randomized trial examined the impact of a Heifer Nepal intervention on child diet, growth, and development. The 3 treatment arms compared were: community development plus training on human nutrition/livestock production vs. this training alone vs. control. Child 24-h diet recall and anthropometry was obtained at 6 household visits (5854 observations, children ages 6–60 mo); developmental assessments (Ages & Stages Questionnaire, ASQ) were performed on a subset of children at midline and endline. Few ASFs were consumed by children in the project area; milk most frequently (29%). The full intervention significantly increased diet diversity but milk consumption remained relatively static despite many households having dairy animals. At endline, 15% drank milk 1–4 times/week, and 64% drank none. However, compared with milk non-consumers, children who consumed milk had significantly higher weight-for-height and head circumference z scores (−0.75 vs −0.66, P = 0.005; −1.14 vs −1.04, P < 0.001). Additionally, milk consumers had significantly higher ASQ scores (midline 232 vs 204, P < 0.0001; endline 211 vs 196, P < 0.001) than non-consumers. In this rural Nepali population, milk consumption was strongly linked to child growth and developmental performance. However, an educational intervention promoting ASFs did not increase milk consumption. Milk availability, cultural practices, and preference for sale over child intake may account for this finding. Further investigation of milk consumption practices in this setting are warranted, as the results indicate the fundamental importance of dietary milk to child well-being.