The Air Quality Health Index (AQHI) was originally developed in Canada. However, little is known about its validity in communicating morbidity risks. We aimed to establish the AQHI in Shanghai, China, and to compare the associations of AQHI and existing Air Pollution Index (API) with daily mortality and morbidity. We constructed the AQHI as the sum of excess total mortality associated with individual air pollutants, and then adjusted it to an arbitrary scale (0-10), according to a time-series analysis of air pollution and mortality in Shanghai from 2001 to 2008. We examined the associations of AQHI with daily mortality and morbidity, and compared these associations with API from 2005 to 2008. The coefficients of short-term associations of total mortality with particulate matter with an aerodynamic diameter less than 10 μm (PM(10)), PM(2.5) and nitrogen dioxide (NO(2)) were used in the establishment of AQHI. During 2005-2008, the AQHI showed linear non-threshold positive associations with daily mortality and morbidity. A unit increase of the PM(10)-AQHI was associated with a 0.90% [95% (confidence interval, CI), 0.43 to 1.37], 1.04% (95%CI, 0.04 to 2.04), 1.62% (95%CI, 0.39 to 2.85) and 0.51% (95%CI, 0.09 to 0.93) increase of current-day total mortality, hospital admissions, outpatient visits and emergency room visits, respectively. The PM(2.5)-AQHI showed quite similar effect estimates with the PM(10)-AQHI. In contrast, the associations for API were much weaker and generally statistically insignificant. The AQHI, compared with the existing API, provided a more effective tool to communicate the air pollution-related health risks to the public.