Background: Knowledge of how influenza viruses spread in a community is important for planning and implementation of effective interventions, including social distancing measures. Households and schools are implicated as the major sites for influenza virus transmission. However, the overall picture of community transmission is not well defined during actual outbreaks. We conducted a community-based prospective cohort study to describe the transmission characteristics of influenza in Mongolia. Methods and Findings: A total of 5,655 residents in 1,343 households were included in this cohort study. An active search for cases of influenza-like illness (ILI) was performed between October 2010 and April 2011. Data collected during a community outbreak of influenza A(H3N2) were analyzed. Total 282 ILI cases occurred during this period, and 73% of the subjects were aged <15 years. The highest attack rate (20.4%) was in those aged 1-4 years, whereas the attack rate in those aged 5-9 years was 10.8%. Fifty-one secondary cases occurred among 900 household contacts from 43 households (43 index cases), giving an overall crude household secondary attack rate (SAR) of 5.7%. SAR was significantly higher in younger household contacts (relative risk for those aged <1 year: 9.90, 1-4 years: 5.59, and 5-9 years: 6.43). We analyzed the transmission patterns among households and a community and repeated transmissions were detected between households, preschools, and schools. Children aged 1-4 years played an important role in influenza transmission in households and in the community at large. Working-age adults were also a source of influenza in households, whereas elderly cases (aged ≥65 years) had no link with household transmission. Conclusions: Repeated transmissions between households, preschools, and schools were observed during an influenza A(H3N2) outbreak period in Mongolia, where subjects aged 1-4 years played an important role in influenza transmission.