Background and objective Globally, around 20 million children suffer from severe acute malnutrition (SAM). Identifying a more economical treatment for those affected has the potential to make treatment more available and improve prognosis for recovery and future health. Design/methods The double-blind randomized study compared taste acceptability (measured by the eagerness to eat) and efficacy of soy-based RUTF (S-RUTF) with milk-based RUTF (M-RUTF) in 6- to 59-month-old children suffering from SAM (WHZ < −3) at icddr,b, in Bangladesh. These SAM children were enrolled in the study after completion of their stabilization phase of treatment. Tolerance of test-RUTF was also tested during the efficacy trial. Results The cross-over taste acceptability study, conducted in 36 children, revealed similar results between products and an absence of side effects. The efficacy trial enrolled 260 children (130, each group) with similar baseline characteristics, including mean ± SD age 15.0 ± 8.0 months, WHZ − 3.41 ± 0.40 and mid-upper arm circumference (MUAC) 11.1 ± 0.7 cm. The features at the end of study by RUTF group were (in S-RUTF vs. M-RUTF, respectively): total days from enrollment: 44 ± 34 versus 39 ± 30; weight gain (kg): 0.698 ± 0.438 versus 0.741 ± 0.381 and rate of weight gain (g/kg/d): 3.9 ± 3.2 versus 5.2 ± 4.6; MUAC gain (cm): 0.9 ± 0.7 versus 0.9 ± 0.6; and improvement of WHZ: 1.12 ± 0.82 versus 1.22 ± 0.68 (all data were man ± SD and none were significantly different between the groups). At enrollment and the end of intervention, the body composition total body water (TBW): 70.3 ± 3.2 vs. 69.9 ± 3.5%, and fat: 11.0 ± 4.0 vs.11.5 ± 4.3% at baseline; and TBW: 65.5 ± 4.1 vs. 65.9 ± 4.6%; and fat: 16.8 ± 5.2 vs. 16.2 ± 5.8% in S-RUTF and M-RUTF group, respectively was found similar. Moreover, the increment of total TBW, FM, and FFM was also observed similar between the groups. Conclusions This is the first randomized trial comparing S-RUTF using soy protein isolate with milk-based RUTF including comparison of body composition. S-RUTF was found equally acceptable as of milk-based RUTF without any adverse event. Children receiving S-RUTF showed similar pattern of changes in anthropometric indices, and body composition as of milk-based RUTF. Greater number of SAM children can be managed in the community with comparatively low-cost soy-based RUTF. Trial registration NCT01634009.