The outbreak of the B.1.1.529 lineage of severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) (Omicron) has caused an unprecedented number of Coronavirus Disease 2019 (COVID-19) cases, including pediatric hospital admissions. Policymakers urgently need evidence of vaccine effectiveness in children to balance the costs and benefits of vaccination campaigns, but, to date, the evidence is sparse. Leveraging a population-based cohort in Chile of 490,694 children aged 3-5 years, we estimated the effectiveness of administering a two-dose schedule, 28 days apart, of Sinovac's inactivated SARS-CoV-2 vaccine (CoronaVac). We used inverse probability-weighted survival regression models to estimate hazard ratios of symptomatic COVID-19, hospitalization and admission to an intensive care unit (ICU) for children with complete immunization over non-vaccination, accounting for time-varying vaccination exposure and relevant confounders. The study was conducted between 6 December 2021 and 26 February 2022, during the Omicron outbreak in Chile. The estimated vaccine effectiveness was 38.2% (95% confidence interval (CI), 36.5-39.9) against symptomatic COVID-19, 64.6% (95% CI, 49.6-75.2) against hospitalization and 69.0% (95% CI, 18.6-88.2) against ICU admission. The effectiveness against symptomatic COVID-19 was modest; however, protection against severe disease was high. These results support vaccination of children aged 3-5 years to prevent severe illness and associated complications and highlight the importance of maintaining layered protections against SARS-CoV-2 infection.