Globally 165 million children under five years of age are stunted. Hence development of local therapeutic nutritional intervention is recommended by WHO. Present study was designed to find the efficacy of the nutritional intervention for the recovery of impaired lipid metabolism and correlation of weight for height with cholesterol, triglyceride in malnourished children. 105 test and 100 control SAM children without infection, of 1 to 5 years of age and either sex were enrolled. Test group was given treatment of nutritional intervention therapy, providing 2.5 to 3gm Protein and 90100 kcal/kg body Weight/day, for the three months. Their Anthropometric, and Biochemical parameters were measured before and after the nutritional therapy. Before the nutritional intervention treatment P values for Serum Total cholesterol, Triglyceride, Weight for height, were insignificant suggestive of similar baseline characteristics at enrollment. After nutritional intervention treatment P values for Serum Total cholesterol, Triglyceride, Weight for height were highly significant. The r value of Pearson correlation coefficient for triglycerides in the study group and its ANOVA model was very significant, showing poor positive correlation with weight for height while for total cholesterol it was found to be insignificant. Depending on results we conclude that it is the most effective food supplement for the speedy recovery of the impaired lipid metabolism in SAM children and the use of weight for height as a anthropometric marker for the pre indication of fatty liver in malnourished children.