This report discusses the number of handicapped Indian preschoolers on the 63 reservations with schools administered by the Bureau of Indian Affairs (BIA) and the sufficiency of services they receive. Information for the report was obtained from BIA's special education coordinators. The report estimates that 2,948 handicapped Indian children aged 3 and 4 live on the 63 reservations. Only 838 were receiving special education services in school year 1988-89 from one or more service providers, including BIA, Head Start, Indian Head Start, and local public school districts. Of the 2,110 preschoolers who were not receiving special education services, about 1,237 were not individually identified and located, a process required by federal regulations. Of the 791 handicapped Indian preschoolers with Individualized Education Programs (IEPs), at least 24% were receiving fewer services than their IEPs prescribed. Preschoolers received insufficient services because of shortages of qualified personnel and inadequate funding to hire them. In addition, BIA, the Department of Education, and the states have differing interpretations about who must provide services to handicapped Indian children on reservations with BIA schools. Seven appendixes include: a technical description of the methodologies used to estimate the number of handicapped Indian preschoolers; the data collection instrument; and comments from the Department of the Interior. (JDD)