Introduction: The Paediatric Active Enhanced Disease Surveillance (PAEDS) network is a hospital-based active surveillance system employing prospective case ascertainment for selected serious childhood conditions, particularly vaccine preventable diseases and potential adverse events following immunisation (AEFI). PAEDS data is used to better understand these conditions, inform policy and practice under the National Immunisation Program, and enable rapid public health responses for certain conditions of public health importance. PAEDS enhances data available from other Australian surveillance systems by providing prospective, detailed clinical and laboratory information on children with selected conditions. This is the third annual PAEDS report, and presents surveillance data for 2016. Methods: Specialist nurses screened hospital admissions, emergency department records, laboratory and other data, on a daily basis in 5 paediatric tertiary referral hospitals in New South Wales, Victoria, South Australia, Western Australia and Queensland to identify children with the conditions under surveillance. Retrospective data on some conditions was also captured by an additional hospital in the Northern Territory. Standardised protocols and case definitions were used across all sites. Conditions under surveillance in 2016 included acute flaccid paralysis (AFP) (a syndrome associated with poliovirus infection), acute childhood encephalitis (ACE), influenza, intussusception (IS; a potential AEFI with rotavirus vaccines), pertussis, varicella-zoster virus infection (varicella and herpes zoster), invasive meningococcal and invasive Group A streptococcus diseases. Most protocols restrict eligibility to hospitalisations; Emergency Department (ED) only presentations are also included for some conditions. Results: In 2016, there were 673 cases identified across all conditions under surveillance. Key outcomes of PAEDS included: contribution to national AFP surveillance to reach World Health Organization (WHO) reporting targets; identification of the leading infectious causes of acute encephalitis which included human parechovirus, influenza, enteroviruses, Mycoplasma pneumoniae, and bacterial meningo-encephalitis; demonstration of high influenza activity with vaccine effectiveness (VE) analysis demonstrating some protection offered through vaccination. All IS cases associated with vaccine receipt were reported to the relevant state health department. Varicella and herpes zoster case numbers increased from previous years associated with suboptimal vaccination in up to 40% of cases identified. Pertussis surveillance continued in 2016 with the addition of test negative controls captured for estimating vaccine effectiveness. Surveillance for invasive meningococcal disease showed predominance for serotype B in absence of immunisation, and new invasive group A streptococcus surveillance captured severe disease in children. Conclusions: PAEDS continues to provide unique policy-relevant data on serious paediatric conditions using hospital-based sentinel surveillance.