Delayed diagnosis of active pulmonary tuberculosis (TB) among hospitalized patients is common and believed to contribute significantly to nosocomial transmission. This study was conducted to define the occurrence, associated patient risk factors, and outcomes among patients and exposed workers of delayed diagnosis of active pulmonary TB. Among 429 patients newly diagnosed to have active pulmonary TB between June 1992 and June 1995 in 17 acute-care hospitals in four Canadian cities, initiation of appropriate treatment was delayed 1 week or more in 127 (30%). This was associated with atypical clinical and demographic patient characteristics, and after adjustment for these characteristics, with admission to hospitals with low TB admission rate of 0.2-3.3 per 10,000 admissions (odds ratio [OR]: 7.4; 95% confidence interval [CI]: 3.2,17.5) or intermediate TB admissions of 3.4-9.9/10,000 (OR: 2.3; CI: 1.6,3.2) as well as potentially preventable (late) intensive care unit admission (OR: 16.8; CI: 2.0,144) and death (OR: 3.3; CI: 1.7,6.5]). In hospitals with low TB admission rates, initially missed diagnosis, smear-positive patients undergoing bronchoscopy, late intensive care unit admission (OR: 2.3; CI: 0.1,56), and death (OR: 3.8; CI: 1.2,12.1) were more common than in hospitals with high TB admissions (> 10/ 10,000); a similar trend was seen in hospitals with intermediate TB admissions. Even after adjustment for workers' characteristics and ventilation in patients' rooms tuberculin conversions were disproportionately high in hospitals with low and intermediate TB admission rates and significantly higher in hospitals with overall TB mortality rate above 10% (OR: 2.5; CI: 1.6,3.7). In the hospitals studied, as the rate of TB admissions decreased, the likelihood of poor outcomes and risk of transmission of TB infection per hospitalized patient with TB increased. Institutional risk of TB transmission was poorly correlated with number of patients with TB and better correlated with indicators of patient care such as delayed diagnosis and treatment and overall TB-related patient mortality.