Modeled on a similar study conducted in Scotland, this study reports on preschool children in two cities of England's Midlands Region (Birmingham and Coventry). Subjects had special needs including physical, mental, behavioral, speech, and second language problems; in addition, some were gifted. A survey identified children with special needs in ordinary preschool units such as nursery classes, day nurseries, and play groups. Structured interviews with the persons in charge of ordinary units and units attached to special schools yielded data on staffing patterns and training; parent involvement; accommodations; involvement of outside professionals; records kept on each child; and nursery policies regarding admissions, catchment area, and waiting lists. Two observational studies were conducted between October 1979 and December 1981: (1) timed sample structured observations of 17 children with special needs in ordinary preschools; and (2) observations of the communication of seven children, involving a language test and transcriptions of videotape recordings. Interviews with the parents of 13 of the 17 children with special needs focused on parents' choice of preschool unit, special provisions for their child in the preschool, and attitudes toward special preschool units. The final chapter summmarizes results of the research and discusses implications for educational policy. (CB)