The study of 14,000 British families, conducted by Dr David Lawson of University College London, also showed that children in larger families were likely to be shorter than average.
Analysis of children born in the 1990s showed that children with three siblings were 2.5 centimetres (one inch) shorter than the average height for their age. The lost height for older siblings was shown to be short-term but there were long-lasting impacts for the youngest children.
The study suggested that siblings may reduce parents' resources in terms of time, money or love.
The researchers studied 14,000 born in 1990's who were enrolled on the Avon Longitudinal Study of Parents and Children, one of the largest public health studies to be set up in Britain.
The growth rates of the children were measured and then heights were compared with average heights for the corresponding age. The results showed that having older siblings had a bigger impact on the younger siblings.
The most harmful combination was to be the younger sibling of older brothers, while the effect of having older sisters was milder.
''It is well known that children from larger families perform less well at school but this study is the first to suggest that this also applies to height. Height is generally a good proxy to health,'' the BBC quoted Dr Lawson, as saying.
''If you are the oldest child, having younger siblings will not affect your development significantly but if you are one of the younger ones, then you can expect to be shorter than your older siblings,'' he added.
Marjo-Riitta Jarvelin, an expert in epidemiology and public health at Imperial College London, said that the condition of the womb after the first pregnancy may be a crucial factor behind such a phenomenon.
''We know that when women have had a number of pregnancies, they are likely to put on weight and their blood sugar levels can become poorer, and this may have effects on the foetus growing in the womb. It is impossible to know yet what might be causing this effect, though,'' she said.
''It may be that when families get very large, parents are less able to provide proper nutrition for their children and the youngest are most exposed to that,'' she added.