The present study was aimed at developing Arthrospira platensis (Spirulina) fortified traditional foods of the Indian subcontinent, namely sattu (multigrain beverage mix) and chikki (peanut bar) and evaluating their ability to promote recovery from protein and iron deficiency anaemia (IDA) using albino Wistar rats. Addition of Spirulina (at 4% w/w Spirulina inclusion levels) enriched the protein content by 20.33% in sattu and 15.65% in chikki while the iron content was enhanced by 45% in sattu and 29.6% in chikki. In addition, the total carotenoid and polyphenol content and antioxidant capacity of the food products improved after Spirulina incorporation. Supplementation of 100 g of Spirulina fortified food products meets more than 50% of recommended dietary allowances (RDA) of protein, dietary fiber, iron and zinc for the age group 3 to 10 years of children. Spirulina contributed between 11% and 22% of RDA for protein and iron, respectively; however it contributed very negligibly to RDA of dietary fibre with respect to the nutrient requirements for the target age group. Supplementation of Spirulina fortified foods individually promoted bodyweight gain in malnourished rats and restored haemoglobin, serum protein, albumin, serum iron, and hepcidin levels and reduced the iron binding capacity indicating recovery from IDA. Spirulina supplementation ameliorated malnutrition induced oxidative stress in the liver, spleen and kidneys by reducing the lipid peroxidation and enhancing superoxide dismutase and glutathione activities. Histopathological analysis revealed that supplementation of Spirulina fortified foods reversed pathological changes such as fatty changes in the liver cells, thinning of cardiac muscle fibers and degeneration of intestinal villi. Fe–protein deficiency significantly altered the gut microflora by reducing the abundance of beneficial microbes. However, supplementation of Spirulina fortified foods improved the levels of beneficial gut microbes such as Lactobacillus reuteri and Akkermansia muciniphila while reducing the abundance of Helicobacteraceae, Enterobacteria and Clostridia. In summary, supplementation of Spirulina fortified foods promoted recovery from protein and iron deficiency indicating the bioavailability of nutrients (iron and protein) from Spirulina at par with casein and ferrous ascorbate.