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PEELS involves a nationally representative sample of children, 3 to 5 years of age when they entered the study, with diverse disabilities who are receiving preschool special education services in a variety of settings. Topics covered in the report include declassification (children leaving special education), reclassification (movement from one primary disability group to another), changes over time in the special education and related services provided to preschoolers with disabilities, and changes in children’s performance on a series of direct and indirect assessments in the areas of emerging literacy, early math skills, social behavior, and motor skills from 2003-04 to 2004-05. The study found that fifteen percent of children were declassified between 2003-04 and 2004-05. Children were more likely to be declassified when they transitioned from preschool to kindergarten or from kindergarten to first grade. Over that same year, 23 percent of children who continued to receive special education services had a change in their primary disability category. Teachers indicated that 89 percent of the children received speech or language therapy in the 2003-04 school year, and 86 percent of the children received it in 2004-05. Occupational therapy and learning strategies/study skills assistance by a special educator were also commonly reported services both years. The mean overall performance of preschoolers with disabilities increased significantly from 2003-04 to 2004-05 on the Woodcock-Johnson III: Letter-Word Identification subtest, a measure of early literacy skills, and Applied Problems subtest, a measure of early math skills. (Contains 83 tables and 2 figures.)