Abstract Background Various studies of child cortisol secretion and sleep show a close association between poor sleep, deterioration of the HPA axis and unfavorable psychological functioning. However, there is little evidence as to whether these associations are clearly present in pre-school children suffering from psychiatric disorders. Method A total of 30 pre-schoolers suffering from psychiatric disorders (anxiety, adjustment disorders, emotional and attachment disorder; hyperactivity or oppositional disorder) and 35 healthy controls took part in the study. Saliva cortisol secretion was assessed both at baseline and under challenge conditions. Sleep was assessed via activity monitoring for seven consecutive days and nights, using a digital movement-measuring instrument. Parents and teachers completed questionnaires assessing children's cognitive, emotional and social functioning. The Berkeley Puppet Interview provided child-based reports of cognitive–emotional processes. Results Compared to healthy controls, children suffering from psychiatric disorders had much higher cortisol secretion both at baseline and under challenge conditions. Sleep was also more disturbed, and parents and teachers rated children suffering from psychiatric disorders as cognitively, emotionally and behaviorally more impaired, relative to healthy controls. Children with psychiatric disorders reported being more bullied and victimized. Conclusions In five-year old children the presence of psychiatric disorders is reflected not only at psychological, social and behavioral, but also at neuroendocrine and sleep-related levels. It is likely that these children remain at increased risk for suffering from psychiatric difficulties later in life.