Prevalence of anaemia among Nigerian toddlers is reported to be high, and may cause significant morbidity, affects brain development and function, and results in weakness and fatigue. Although, iron fortification can reduce anaemia, yet the effect on gut microbiota is unclear. This open-label randomised study in anaemic malnourished Nigerian toddlers aimed to decrease anaemia without affecting pathogenic gut bacteria using a multi-nutrient fortified dairy-based drink. The test product was provided daily in different amounts (200, 400 or 600 mL, supplying 2.24, 4.48 and 6.72 mg of elemental iron, respectively) for 6 months. Haemoglobin, ferritin, and C-reactive protein concentrations were measured to determine anaemia, iron deficiency (ID) and iron deficiency anaemia (IDA) prevalence. Faecal samples were collected to analyse gut microbiota composition. All three dosages reduced anaemia prevalence, to 47%, 27% and 18%, respectively. ID and IDA prevalence was low and did not significantly decrease over time. Regarding gut microbiota, Enterobacteriaceae decreased over time without differences between groups, whereas Bifidobacteriaceae and pathogenic E. coli were not affected. In conclusion, the multi-nutrient fortified dairy-based drink reduced anaemia in a dose-dependent way, without stimulating intestinal potential pathogenic bacteria, and thus appears to be safe and effective in treating anaemia in Nigerian toddlers.