To increase limited epidemiological knowledge of early childhood psychopathology, a study of prevalence estimates and demographic correlates of psychiatric disorders was conducted in a sample of preschool children. In a two-stage study, parents of 339 children aged 4-6years who came for a medical check-up at three primary care centres in Reykjavik were invited to participate. First, the participants were screened with Brigance Screens and the Strengths and Difficulties Questionnaire (SDQ) for parents and teachers. Subsequently, the children were tested with a short version of Wechsler Preschool and Primary Scales of Intelligence - Revised and their parents were interviewed with the Schedule for Affective Disorders and Schizophrenia for School Aged Children Present and Lifetime Version. Weighted prevalence estimates were calculated and logistic regression was used to analyse the association between risk factors and psychiatric disorders. Of those invited to participate, 317 (93.5%) were included in the screening and of those, 131 received a full diagnostic assessment. The final study sample included 151 girls (47.6%) and 166 boys (52.4%) who represented 11.6% of the total birth cohort in Reykjavik. Weighted prevalence of DSM-IV psychiatric disorders was 10.1% (95% CI 6.7-13.5%) and 57/317 or 18.0% (95% CI 13.8-22.2%), including elimination disorders. Anxiety disorders (5.7%) and attention deficit hyperactivity disorder (3.8%) were the most common disorders in this preschool sample. Poor physical health of parents and higher education was associated with DSM-IV psychiatric disorders of the children. SDQ Total Difficulties score was associated with male gender and poor physical health of parents. This study indicates that psychiatric disorders in preschool children are common and may be correlated with parental health factors.