Background. Asthma is a common childhood illness. The objective of this study is to determine the incidence of physician-diagnosed asthma in preschool years and its relationship to host, prenatal and postnatal factors, early childhood factors, parental factors, household factors and demographic factors. Methods. The study sample was comprised of 8,499 infants and toddlers (<2 years at baseline) enrolled in the Canadian Early Childhood Development Study. Incidence of asthma was determined when the children were in preschool age (2 to 5 years). Results. The 4-year cumulative incidence at preschool age was 13.7% for physician-diagnosed asthma. History of early childhood wheezing before 2 years of age was a significant risk factor for incidence of asthma in preschool years (hazard ratio (HR): 2.32; 95% confidence interval (CI): 2.04-2.65). Factors that were protective for the development of asthma were breastfeeding more than 3 months (HR: 0.82; 95% CI: 0.69-0.97); history of nose or throat infection often in childhood (HR: 0.79; 95% CI: 0.67-0.93); early daycare attendance (HR: 0.85; 95% CI: 0.74-0.98); presence of two or more siblings at birth, (HR: 0.79; 95% CI: 0.64-0.97); and dwelling in rural non- central metropolitan areas (HR: 0.81; 95% CI: 0.69-0.95). Male sex, low birth weight, childhood allergy, single parent, maternal smoking during pregnancy, maternal medication use, parental atopy, and low SES at baseline were significant risk factors for the incidence of physician-diagnosed asthma in preschool years. Conclusion. This study emphasizes the role of wheezing in infant and toddler age on early onset of asthma during preschool years. The results also provide additional importance of early exposures to environmental factors such as early infections, daycare attendance, and rural environment in the development of proper immune dynamics to prevent asthma.