In Papua New Guinea, a significant portion of morbidity and mortality is attributed to water-borne diseases. To reduce incidence of disease, communities and non-governmental organizations have installed rain catchments to provide drinking water of improved quality. However, little work has been done to determine whether these rain catchments provide drinking water of better quality than traditional drinking water sources, and if morbidity is decreased in villages with rain catchments. The specific aim of this study was to evaluate the quality of water produced by rain catchments in comparison with traditional drinking water sources in rural villages in the East Sepik Province. Fifty-four water sources in 22 villages were evaluated for enterococci and Escherichia coli densities as well as 14 health-relevant metals. In addition, we examined how the prevalence of diarrhoeal illness in villages relates to the type of primary drinking water source. The majority of tested metals were below World Health Organization safety limits. Catchment water sources had lower enterococci and E. coli than other water sources. Individuals in villages using Sepik River water as their primary water source had significantly higher incidence of diarrhoea than those primarily using other water sources (streams, dug wells and catchments).