Aims To assess the impact of retail displays of tobacco on tobacco smoking and purchase by smokers and attempting quitters. Design Population-based diary style survey. Setting NSW, Australia. Participants A total of 998 smokers and 111 attempting quitters. Measurements Demographic measures and 4-hourly records over 4 days: number of cigarettes smoked and bought; exposure to cigarette smoking by friends/family or other smokers; and exposure to retail displays of tobacco. Findings Subjects reported seeing cigarettes for sale in more than 40% of the time-periods when they were outside their home. After allowing for factors which are known to increase smoking, people who saw cigarettes for sale were more likely to smoke, and smoked more cigarettes, even if they did not buy cigarettes in the same time-period. There was marginally significant evidence that people exposed to retail displays of tobacco in one time-period were more likely to buy in the following time-period. Conclusions In an environment which permits point-of-sale displays, smokers were found to see tobacco displays in more than 40% of the 4-hour periods that they were outside the home. Exposure to such tobacco displays was associated with a higher probability of smoking, and with higher levels of smoking, even when subjects did not purchase cigarettes.