Childhood malnutrition impairs health, development, and productivity in adulthood. Underweight children have been found to have a variety of cognitive abnormalities. The present study examined the effect of a nutrition-focused intervention on cognitive development among malnourished preschool children between 3 and 5 years of age residing in selected villages of Udupi district, Karnataka. A cluster of 12 villages was chosen randomly. The trial had enrolled preschool children (n = 253) from randomly assigned selected villages to intervention (n = 127) and control arms (n = 126). The mothers in the intervention arm received nutrition-focused intervention and reinforcement of health teaching for 12 months. The post-intervention outcome on the cognitive development of malnourished children was measured at 6 months and 12 months. Statistical analyses indicated that 52% of children in the intervention group had average cognitive development scores on the pre-test, whereas on the post-test, only 5.5% were in the average level of cognitive development. In the control group, the average cognitive development status of the children decreased from 44.4% in the pretest to 26.2% in the post-test. The cognitive development of malnourished children in the intervention group improved compared to the control group (p < 0.001). This study revealed that home-based nutrition-focused food helps to enhance children’s cognitive development.Trial registration: ctri@gov.in. CTRI/31/03/2017/008273 [Registered on: 31/03/2017].