Objectives: To determine whether reduced sleep is associated with differences in body composition and the risk of becoming overweight in young children., Design: Longitudinal study with repeated annual measurements., Setting: Dunedin, New Zealand., Participants: 244 children recruited from a birth cohort and followed from age 3 to 7., Main Outcome Measures: Body mass index (BMI), fat mass (kg), and fat free mass (kg) measured with bioelectrical impedance; dual energy x ray absorptiometry; physical activity and sleep duration measured with accelerometry; dietary intake (fruit and vegetables, non-core foods), television viewing, and family factors (maternal BMI and education, birth weight, smoking during pregnancy) measured with questionnaire., Results: After adjustment for multiple confounders, each additional hour of sleep at ages 3-5 was associated with a reduction in BMI of 0.48 (95% confidence interval 0.01 to 0.96) and a reduced risk of being overweight (BMI ≥ 85th centile) of 0.39 (0.24 to 0.63) at age 7. Further adjustment for BMI at age 3 strengthened these relations. These differences in BMI were explained by differences in fat mass index (-0.43, -0.82 to -0.03) more than by differences in fat free mass index (-0.21, -0.41 to -0.00)., Conclusions: Young children who do not get enough sleep are at increased risk of becoming overweight, even after adjustment for initial weight status and multiple confounding factors. This weight gain is a result of increased fat deposition in both sexes rather than additional accumulation of fat free mass.