Studies on adult racial/ethnic minority populations show that the increased concentration of racial/ethnic minorities in a neighbourhood—a so-called ethnic density effect—is associated with improved health of racial/ethnic minority residents when adjusting for area deprivation. However, this literature has focused mainly on adult populations, individual racial/ethnic groups, and single countries, with no studies focusing on children of different racial/ethnic groups or comparing across nations. This study aims to compare neighbourhood ethnic density effects on young children’s cognitive and behavioural outcomes in the US and in England. We used data from two nationally representative birth cohort studies, the US Early Childhood Longitudinal Study-Birth Cohort and the UK Millennium Cohort Study, to estimate the association between own ethnic density and behavioural and cognitive development at 5 years of age. Findings show substantial heterogeneity in ethnic density effects on child outcomes within and between the two countries, suggesting that ethnic density effects may reflect the wider social and economic context. We argue that researchers should take area deprivation into account when estimating ethnic density effects and when developing policy initiatives targeted at strengthening and improving the health and development of racial and ethnic minority children.