**Core Concept**
The sudden onset of hematuria and proteinuria in an infant with severe dehydration secondary to diarrhea suggests a renal complication, specifically a nephrotic syndrome or a glomerulonephritis. The underlying pathophysiology involves damage to the renal glomeruli, leading to the loss of proteins and blood in the urine.

**Why the Correct Answer is Right**
The most likely cause of this presentation is Hemolytic Uremic Syndrome (HUS), a condition characterized by the triad of hemolytic anemia, acute kidney injury, and thrombocytopenia. HUS typically develops in the setting of E. coli O157:H7 infection, which can cause severe diarrhea. The infection triggers the production of Shiga toxins, which damage the renal glomeruli and lead to the loss of proteins and blood in the urine.

**Why Each Wrong Option is Incorrect**
* **Option A:** Acute Glomerulonephritis is less likely in this context, as it typically presents with a history of upper respiratory tract infection or streptococcal pharyngitis.
* **Option B:** Nephrotic Syndrome is characterized by massive proteinuria, but it is typically not associated with hematuria or acute kidney injury.
* **Option C:** Acute Tubular Necrosis (ATN) is a cause of acute kidney injury, but it is not typically associated with the sudden onset of hematuria and proteinuria.

**Clinical Pearl / High-Yield Fact**
HUS is a medical emergency that requires prompt recognition and treatment. The diagnosis is often made based on the clinical presentation, laboratory findings, and the presence of E. coli O157:H7 in the stool.

**Correct Answer:** C.