Background: Millions of young children attend preschools and other structured child development programs, but little is known about their physical activity levels while in those settings. The purpose of this study was to describe the physical activity levels and demographic and school-related correlates of physical activity in children attending preschools, using a direct observation measurement system. Methods: The Observational System for Recording Physical Activity in Children-Preschool Version was used to measure physical activity levels and related factors in four hundred ninety-three 3- to 5-year-old children in 24 preschools. A minimum of six hundred 30-second observation intervals were recorded for each child. Physical (height/weight) and demographic data also were collected. Results: Children engaged in moderate-to-vigorous physical activity (MVPA) during less than 3% of the observation intervals and were sedentary during more than 80% of the observation intervals. Boys were more likely than girls to engage in MVPA (p = 0.01), and 3-year-old boys were more active than 4- and 5-year-old boys (p = 0.01). The preschool that a child attended explained 27% of the variance in activity levels. Conclusions: The study indicates that young children are physically inactive during most of their time in preschool. The preschool that a child attended was a stronger predictor of physical activity level than any other factor examined. Additional research is needed to identify the characteristics of preschools in which children are more active. (Contains 5 tables and 1 figure.)