Mapuche represents the largest indigenous group in Chile amounting to nearly 10% of the total population. In a longitudinal cohort of 12,398 children, we analyzed the role of ethnicity in physical and psychosocial development of Mapuche and nonindigenous Chilean toddlers (age 2.5 years), taking into account sociodemographic and caregiver characteristics. As indicated by our univariate analysis, the Mapuche developmental niche was characterized by lower income, lower maternal education, poorer quality of the home environment, longer breastfeeding, and higher parental stress. Physical development showed higher body mass index. Mapuche children showed less externalizing problems. We then analyzed the incremental contribution of ethnicity in a series of hierarchical regressions with the second wave of developmental measurements (age 4.5 years) as outcome variables, showing a significant but modest incremental contribution of ethnicity to the prediction of children's development between 2.5 and 4.5 years of age. Controlling for environmental variables, Mapuche showed less externalizing and internalizing, behavior problems. Socioeconomic status, quality of the home environment, and parenting stress were stronger predictors of socioemotional development than ethnicity per se.