In seeking to provide universal health care through its primary care-oriented Family Health Program, Brazil has attempted to reduce hospitalization rates for preventable illnesses such as childhood gastroenteritis. We measured rates of Primary Care-sensitive Hospitalizations and evaluated the impact of the Family Health Program on pediatric gastroenteritis trends in high-poverty Northeast Brazil. We analyzed aggregated municipal-level data in time-series between years 1999–2007 from the Brazilian health system payer database and performed qualitative, in-depth key informant interviews with public health experts in municipalities in Bahia. Data were sampled for Bahia’s Salvador microregion, a population of approximately 14 million. Gastroenteritis hospitalization rates among children aged less than 5 years were evaluated. Declining hospitalization rates were associated with increasing coverage by the PSF (P = 0.02). After multivariate adjustment for garbage collection, sanitation, and water supply, evidence of this association was no longer significant (P = 0.28). Qualitative analysis confirmed these findings with a framework of health determinants, proximal causes, and health system effects. The PSF, with other public health efforts, was associated with decreasing gastroenteritis hospitalizations in children. Incentives for providers and more patient-centered health delivery may contribute to strengthening the PSF’s role in improving primary health care outcomes in Brazil.