Immunisation programs are designed to reduce serious morbidity and mortality from influenza, but most evidence supporting the effectiveness of this intervention has focused on disease in the community or in primary care settings. We aimed to examine the effectiveness of influenza vaccination against hospitalisation with confirmed influenza. We compared influenza vaccination status in patients hospitalised with PCR-confirmed influenza with patients hospitalised with influenza-negative respiratory infections in an Australian sentinel surveillance system. Vaccine effectiveness was estimated from the odds ratio of vaccination in cases and controls. We performed both simple multivariate regression and a stratified analysis based on propensity score of vaccination. Vaccination status was ascertained in 333 of 598 patients with confirmed influenza and 785 of 1384 test-negative patients. Overall estimated crude vaccine effectiveness was 57 (41 , 68 ). After adjusting for age, chronic comorbidities and pregnancy status, the estimated vaccine effectiveness was 37 (95 CI: 12 , 55 ). In an analysis accounting for a propensity score for vaccination, the estimated vaccine effectiveness was 48.3 (95 CI: 30.0, 61.8 ). Influenza vaccination was moderately protective against hospitalisation with influenza in the 2010 and 2011 seasons.