The boy and his mother were being treated in a specially ventilated room at the University of Chicago's Comer Children's Hospital, the Chicago Tribune reported Saturday.
The family's name and home town were not released at their request.
The boy developed a virulent rash over 80 percent of his body earlier this month after coming in contact with his father, who had recently been vaccinated for smallpox before he was to be deployed overseas by the Army, the paper said.
Physicians stressed that the boy was not suffering from smallpox, but from the related vaccinia virus which is used to convey immunity to the much deadlier disease. They said the infection was a rare condition called eczema vaccinatum, which has not been reported since at least 1990, when the military ended a previous program of smallpox vaccination. Smallpox was declared eradicated in 1980.
The military began smallpox vaccinations again in 2002 because of bioterrorism fears.
Doctors said the child suffered from eczema, which is a known risk factor for vaccinia infection. People with eczema are warned not to have close physical contact with the recently vaccinated because the condition allows the virus to enter the skin, they said.
The U.S. Defense Department and federal, state and local health authorities have been in daily contact with the hospital about the case. Health officials say there is no infection risk for the general population because the vaccinia virus can be spread only through close physical contact.
Nonetheless, Dr. Madelyn Kahana, the hospital's chief of pediatric intensive care, said staff members treating the boy and his mother were required to wear face masks and gloves, and that the two had been placed in a special room with negative air pressure, so all air would blow inward.
Kahana said the boy had been treated with a potent antiviral drug, as well as with an anti-vaccinia agent supplied by the CDC and the experimental drug ST-246, which was untried as a therapy in humans.
She said the boy appeared to be improving this week, but will probably lose 20 percent of his outer skin layer.