Empathy, the ability to feel the emotions of others and respond affectively to these emotions, is an important factor in the development of social competence. The purpose of this study was to examine empathy levels in toddlers with moderate hearing loss (MHL) compared to toddlers with no hearing loss (nHL), and to explore the relation between language ability and empathy. We focused on affective empathy and the precursors of cognitive empathy. A total of 23 toddlers with MHL and 21 toddlers with nHL participated in the study. Parent report (ITSEA) and observation measures were used to rate the toddlers' levels of empathy. The results showed that the levels of affective empathy in toddlers with MHL and with nHL were similar on both measures. Toddlers with MHL lagged behind their peers with nHL on some precursors of cognitive empathy (intention understanding and joint attention). Language ability was unrelated to empathy levels in both groups of toddlers. In conclusion, toddlers with MHL seem to be at risk for problems in their empathy development. Although they are aware of the emotions of others, the development of more complex skills needed for an adequate empathic response is delayed in comparison with their hearing peers.