Background Cow milk is an important source of macro-and micronutrients. However, it has low iron content but high content of casein and calcium thus could negatively influence hemoglobin synthesis. On the other hand, camel milk contains higher iron concentration than cow milk. In addition, the majority of iron in camel milk is associated with the lower molecular fraction of casein suggesting better bioavailability. Furthermore, vitamin C concentration, a useful iron absorption enhancer, is more than three-fold greater in camel milk than cow milk. This study compared hemoglobin concentration among young children consuming consistently cow milk or camel milk. Methods Hemoglobin concentration of young children (aged 6-59 mo) from settled pastoralist communities of the Somali region, Ethiopia, consistently consuming cow milk (n = 166) or camel milk (n = 166) was determined. In addition, socio-demographic and water, sanitation, and hygienic (WASH) conditions of study participants' households were captured. Furthermore, dietary intake and anthropometric characteristics of participating children were assessed. Results Among the participating children, 38.6% were underweight, 33.4% were stunted, and 34.5% were wasted. In addition, 77.4% of children were anemic. The present study households had poor WASH conditions. Only 0.6% of children had the minimum acceptable dietary diversity. There was small but significant mean hemoglobin difference among camel milk and cow milk consuming children (9.6±1.8 g/dl vs 9.1±2.2 g/dl; p = 0.012). In addition, the odds of low hemoglobin concentration was greater among cow milk consuming children than camel milk consuming children [AOR 2.17; 95 CI; 1.39, 3.37; p = 0.001]. However, the overall anemia prevalence among the two groups was similar. Conclusion Camel milk consumption is associated with better hemoglobin concentration but may not be sufficient to prevent anemia in populations from resource poor settings. The etiology of anemia is multifactorial thus further studies on the link between milk consumption and hemoglobin concentration are important.