Few studies have investigated if, and how, red cell transfusion and anaemia interact. We analysed 60,955 admissions to three metropolitan hospitals in Western Australia between 2008 and 2017 to determine whether the relationship between red cell transfusion and outcomes in surgical patients differed by lowest (nadir) level of haemoglobin. At levels above 100 g.l−1, in‐hospital, 30‐day and 1‐year mortality were higher with transfusion, the adjusted odds ratios (ORs) (95%CI) being 8.80 (4.43–17.45) p < 0.001 and 3.68 (1.93–7.02) p < 0.001 and the adjusted hazard ratio (95%CI) being 1.83 (1.28–2.61) p = 0.001, respectively. Likewise, between 90 g.l−1 and 99 g.l−1, in‐hospital, 30‐day and 1‐year mortality were higher with transfusion, the adjusted odds ratio (95%CI) being 3.76 (2.23–6.34) p < 0.001 and 1.96 (1.23–3.12) p < 0.001 and the adjusted hazard ratio (95%CI) being 1.34 (1.05–1.70) p = 0.017, respectively. Length of stay was longer with transfusion at nadir haemoglobin levels above 100 g.l−1 and in the following ranges: 90–99 g.l−1, 80–89 g.l−1, 70–79 g.l−1 and 60–69 g.l−1, the adjusted rate ratio (95%CI) being 1.38 (1.25–1.53) p < 0.001, 1.18 (1.10–1.27) p < 0.001, 1.17 (1.13–1.22) p < 0.001, 1.07 (1.02–1.12) p = 0.003 and 1.24 (1.13–1.36) p < 0.001, respectively. Mortality was higher with red cell transfusion at haemoglobin levels greater than 90 g.l−1, whereas at all levels below 90 g.l−1 mortality was not significantly higher or lower. Length of stay was longer with transfusion at nadir haemoglobin levels of 60 g.l−1 or above. Our results suggest that nadir haemoglobin modified the relationship between red cell transfusion and outcomes and adds to the evidence recommending caution before transfusing red cells.