Penicillin (PCN) allergy label, reported in approximately 5% of children, influences antibiotic choice and prolongs hospital stay. To our knowledge, the impact of PCN allergy label on clinical outcomes of pneumonia in children is not well characterized. To investigate the impact of PCN allergy label on clinical outcomes of pneumonia in children. In this propensity score-matched cohort study, we used the TriNetX research network, a population-based database, to compare the 30-day risk of hospitalization, need for intensive level of care, and acute respiratory failure from pneumonia between pediatric patients (aged 1-17 years) with and without a PCN allergy label after matching the 2 cohorts for demographic and medical comorbidities. Antibiotic prescription patterns were also contrasted. When comparing 3793 pediatric patients with pneumonia labeled with a PCN allergy with matched children without a PCN allergy label, PCN allergy label was associated with a higher risk of hospitalization (relative risk [RR], 1.15; 95% confidence interval [CI], 1.07-1.23), acute respiratory failure (RR, 1.27; 95% CI, 1.17-1.39), and need for intensive level of care (RR, 1.46; 95% CI, 1.15-1.84). PCN allergy label resulted in overutilization of broader-spectrum antibiotics and increased complications including cutaneous drug reactions (RR, 2.43; 95% CI, 1.31-4.52) and Clostridioides difficile infection (RR, 2.25; 95% CI, 1.14-4.44). Children with a PCN allergy label are more likely to be hospitalized, receive broader-spectrum antibiotics, and develop acute respiratory failure from pneumonia. Delabeling may offer a way to lessen morbidity from pneumonia in children.