Research on primary and secondary school composition has shown that a school's socioeconomic status, as an aggregated and stratified index, has a contextual effect on children's school performance. For Chinese children, preschool is their first formal schooling experience. Preschools are segregated by the enrolled children's socioeconomic status. However, no studies have yet examined the role of preschool socioeconomic status in young Chinese children. Taking family socioeconomic status as the structure index and the home learning environment and authoritative parenting as the process indexes, the current study aimed to examine how preschool socioeconomic status operates independently and moderates the family environment to determine Chinese children's early academic and social development. Data were obtained from 826 children aged 36-74 months from 29 urban preschools in Beijing. Hierarchical linear modeling analyses showed that preschool socioeconomic status significantly directly predicted children's academic skills but not their social skills. Participation in higher socioeconomic status preschools appeared to compensate for the literacy skills of children from a lower family socioeconomic status, and it reinforced the positive effects of authoritative parenting on the children's social skills. These results suggest that the optimal development of young children depends on the "fit" between their family's environmental characteristics and the preschool in which they enrolled. (author abstract)