In a previous study a higher than expected prevalence of asthma was found in Lake Munmorah, a coastal town near two power stations, compared with another coastal control town. This study aimed to compare atopy, bronchial hyperreactivity, and reported symptoms of asthma in the power station town and a second control area with greater socioeconomic similarity. A cross sectional survey was undertaken. Lake Munmorah, a coastal town near two power stations, and Dungog, a country town in the Hunter Valley, NSW, Australia. All children attending kindergarten to year 6 at all schools in the two towns were invited to participate in 1990. The response rates for the questionnaire for reported symptoms and associated demographic data were 92% in Lake Munmorah and 93% in Dungog, with 84% and 90% of children respectively being measured for lung function, atopy, and bronchial reactivity. There were 419 boys and 432 girls aged 5 to 12 years. Main outcome measures were current wheeze and bronchial hyper-reactivity, defined as a fall in forced expiratory volume in 1 second (FEV1) or peak expiratory flow (PEF) of 20% or more. Current wheeze was reported in 24.8% of the Lake Munmorah children compared with 14.6% of the Dungog children. Bronchial hyper-reactivity was similar for both groups--25.2% in Lake Munmorah and 22.3% in Dungog. The mean baseline FEV1 was lower in Lake Munmorah than in Dungog (p < 0.001). Dungog children were more likely to have positive skin test to house dust mite (Dungog 27.0%, Lake Munmorah 20.2%, p = 0.028) but there were no other differences in skin test atopy in the two towns. After adjusting for age, gender, any smoker in the house, and positive dust mite skin test, the odds of current wheeze in Lake Munmorah compared with Dungog was 2.16 (95% confidence interval 1.45, 3.15). Baseline lung function was lower and reported symptoms of asthma were higher in the power station town, but bronchial hyper-reactivity and skin test defined atopy were similar in the two communities. These results are consistent with the previous study and confirm the increased presence of reported symptomatic illness in the town near power stations.