To identify and evaluate the systems failures that underlie errors causing adverse drug events (ADEs) and potential ADEs. Systems analysis of events from a prospective cohort study. All admissions to 11 medical and surgical units in two tertiary care hospitals over a 6-month period. Errors, proximal causes, and systems failures. Errors were detected by interviews of those involved. Errors were classified according to proximal cause and underlying systems failure by multidisciplinary teams of physicians, nurses, pharmacists, and systems analysts. During this period, 334 errors were detected as the causes of 264 preventable ADEs and potential ADEs. Sixteen major systems failures were identified as the underlying causes of the errors. The most common systems failure was in the dissemination of drug knowledge, particularly to physicians, accounting for 29% of the 334 errors. Inadequate availability of patient information, such as the results of laboratory tests, was associated with 18% of errors. Seven systems failures accounted for 78% of the errors; all could be improved by better information systems. Hospital personnel willingly participated in the detection and investigation of drug use errors and were able to identify underlying systems failures. The most common defects were in systems to disseminate knowledge about drugs and to make drug and patient information readily accessible at the time it is needed. Systems changes to improve dissemination and display of drug and patient data should make errors in the use of drugs less likely.