Abstract Background Acute encephalitis/encephalopathy (AE) associated with viral and other pathogens leads to neurological sequelae and mortality. Knowing the prognostic factors is therefore important for immediate interventions. We examined early-phase unfavorable prognostic factors among children with AE using a nationwide database. Methods We performed a retrospective cohort study using the Diagnosis Procedure Combination database, which includes approximately half of acute-care inpatients across Japan. We enrolled children aged ≤ 18 years who were hospitalized for AE and discharged from April 2010 to March 2018. The composite unfavorable outcome included the following at discharge: in-hospital death, tracheostomy, enteral tube feeding, and physical rehabilitation. Unfavorable prognostic factors were assessed using a multivariable Poisson regression model including patient characteristics, associated pathogens, and interventions within 2 days of admission adjusting for within-hospital clustering. Results This study included 9386 children with AE (median age, 3 years). A total of 241 (2.6%) in-hospital deaths occurred, and 2027 (21.6%) patients had the composite unfavorable outcome. Significant unfavorable prognostic factors were age 12–18 years, congenital anomalies, epilepsy, and Japan Coma Scale score of 100–300 at admission (ie, worse levels of consciousness). In contrast, herpes simplex virus infection and influenza virus infection were associated with favorable outcomes. Conclusions We identified early-phase (within 2 days of admission) unfavorable prognostic factors among children with AE. These findings will help identify patients who may benefit from early aggressive therapeutic interventions.