The increasing prevalence of atopic dermatitis (AD) is associated with variations in indoor environments. In Korea, many inner walls of homes are covered with wallpaper: such walls emit indoor air pollutants, including volatile organic compounds (VOCs) and formaldehyde. This randomized, double-blind study investigated the effects of wallpaper on indoor air quality and AD. Thirty-one children (aged three to eight years) with moderate AD were assigned to environmentally-friendly (EF) and polyvinyl chloride (PVC) wallpaper groups. Indoor air concentrations of VOCs, natural VOCs (NVOCs), formaldehyde, and total suspended bacteria were measured before and two (W2) and eight weeks (W8) after wallpapering. Scoring Atopic Dermatitis (SCORAD) evaluations and blood tests were performed during the same period. The EF wallpaper and PVC wallpaper groups showed similar trends in the changes in total VOCs (TVOC) and formaldehyde content in the indoor air. However, the EF wallpaper group showed more improvement on the SCORAD at W2 and W8 than the PVC wallpaper group. The SCORAD index was positively correlated with several indoor air pollutants. Further, the SCORAD index and NVOC % were negatively correlated. Improved SCORAD index and effects of wallpapering on indoor air quality improvements occurred within a short period of time in both groups. We believe that NVOCs in indoor air after EF wallpapering have a beneficial effect on health.