Background: Eczema is commonly associated with sensitization in infants, but the causative role of sensitization in the development of eczema has been questioned. Objective: To determine if allergic sensitization increases the risk of developing eczema, or alternatively, if eczema increases the risk of developing allergic sensitization. Methods: We used data from the Melbourne Atopy Cohort Study, a prospective birth cohort of 552 infants with a family history of atopic disease. The main outcomes were risk of developing eczema from 6 months to 7 years of age in asymptomatic infants; and risk of developing sensitization, as measured by skin prick tests to milk, egg white, peanut, house dust mite, rye grass pollen and cat extracts, in previously unsensitized infants. Results: Sensitization to food extracts at 6 months was associated with an increased risk of developing eczema [hazard ratio (HR) 1.63, 95 confidence interval 1.13-2.35] up to 7 years of age, after excluding infants with eczema in the first 6 months. However, eczema in the first 6 months was also associated with increased risk of new sensitization at both 1 year (HR 2.34, 1.38-3.98) and 2 years (HR 3.47, 1.65-7.32). Conclusion: In some infants, sensitization precedes and predicts the development of eczema, while in others eczema precedes and predicts the development of sensitization. This indicates that there are multiple pathways to atopic eczema.