Several aspects of the indoor early childhood education (ECE) environment may be associated with physical activity (PA), including indoor areas. Modifying the indoor physical environment in classrooms could have significant potential to influence PA in young children. However, to our knowledge, PA promotion interventions involving changes to the ECE indoor physical environment have not been empirically implemented or monitored by accelerometry and direct observation. Therefore, the aims of this study were twofold: (a) to evaluate personal, social, and environmental correlates of moderate-vigorous PA (MVPA) in young children during indoor free play time; and (b) to assess the impact of incorporating a physical activity area in an indoor ECE environment on PA patterns during recess and the overall school day. Outcomes were measured at baseline, at 1 week post-intervention, and at 6 weeks' follow-up. We studied contextual variables such as the presence of others, location, availability of equipment, and gender-based group interactions during indoor free play. It is notable that at 1-week post-intervention, both girls and boys increased their PA levels, but by the 6-week follow-up, the increase in MVPA was significantly higher in boys compared to girls, suggesting that our PA area is not benefitting girls to the same extent as their male counterparts. In addition, at all time points, boys spent more time during recess and overall in MVPA minutes than girls. MVPA is below the recommended levels for this age during the school day, the role of the indoor physical environment and context should be revised.