Background: Varicella in children, although usually mild, can cause hospitalization and rarely death. This study examined patterns of hospitalized children with varicella, and associated varicella genotypes, in 4 tertiary children's hospitals throughout Australia before and after varicella vaccine was introduced. Methods: We obtained coded data on discharge diagnoses from each hospital before (1999 to 2001) and after (2007 to 2010) varicella vaccine introduction in 2005, adding active surveillance to capture clinical features, complications and immunization history in the latter period. Varicella vesicles were swabbed, and genotyping of varicella strains was performed by real-time polymerase chain reaction amplification. Results: Overall, a 68% reduction in coded hospitalizations (varicella, 73.2% [P< 0.001]; zoster, 40% [P = 0.002]) occurred post-vaccine introduction. Of children with detailed clinical data (97 varicella and 18 zoster cases), 46 (40%) were immunocompromised. Only 6 of 32 (19%) age-eligible immunocompetent children were immunized. Complications, most commonly secondary skin infections (n = 25) and neurologic conditions (n = 14), occurred in 44% of children. There were no deaths; but 3 immunocompetent unimmunized children had severe multiple complications requiring intensive care. All strains genotyped were "wild-type" varicella, with Clade 1 (European origin) predominating. Conclusions: After the introduction of varicella vaccine, coverage of greater than 80% at 2 years of age was achieved, with varicella hospitalizations reduced by almost 70%. Of hospitalized children age-eligible for varicella vaccine, 80% were unimmunized, including all cases requiring intensive care.